American Greetings Corp. (AM)

F3Q11 (Qtr End 11/26/2010) Earnings Call

December 22, 2010 9:00 am ET


Gregory Steinberg - Treasurer, Director of IR

Zev Weiss - CEO

Steve Smith - CFO

Jeff Weiss - President and COO


Jeff Stein - Soleil Securities

Gregg Hillman - First Wilshire Securities Management

Philip Lee - First Investors

Ron Gibbs - Platte River Capital



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Welcome to the American Greetings Corporation third quarter fiscal 2011 earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Gregory Steinberg.

Gregory Steinberg

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

We released our earnings for the second quarter of fiscal 2011 this morning. If you do not yet have our third quarter press release, you can find a copy within the Investors section of the American Greetings website at

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'd 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?

Zev Weiss

Thank you, Greg and good morning everyone. Today I'll cover three main topics. First, I will speak about our product leadership strategy, and show share some examples of our recent product introductions; second, I will give an update on the integration of Papyrus and Recycled Greetings. And finally, I'll speak about our outlook for the balance of fiscal year 2011.

I am pleased with our overall performance here in the third fiscal quarter, while the pace of the economic recovery remains challenged. We have managed to maintain our level of revenue from our core business, due in part to introducing new and innovative products. The combination of relatively steady revenues along with good expense management has resulted in solid earnings for the quarter.

Steve will provide additional detail about our financial results in a few moments.

Our team continues to be focused on the product leadership strategy in our core business. We believe that product innovation is a key component of product leadership, as it will help to drive interest and excitement in the category, as well as meet the changing needs of today's consumers.

Product innovation is executed in a way that full supports our retail partner strategies and ultimately helps consumers connect with each other in a special and differentiated way. As we have discussed in the past, product leadership also means getting four important variables correct, simultaneously the right card with the right presentation at the right time with the right price. Daily execution of this strategy in tens of thousands of retail stores is not easy. But that is our challenge and we believe that we are meeting that challenge.

Let me give you a few examples of how we meet that challenge. My first example focused on our leadership role in using liquid crystal displays or LCDs in cards. We were a leader in brining LCD greeting cards into the greeting card in last holiday season. We believe that we have improved upon last year's offering and have now created new cards that are available either preloaded with holiday images or ready to be customized with up to 50 of your own photos.

These patented cards feature full color LCD displays and high quality audio. Instrumental music and a customized slide show play automatically each time the card is open. The card comes with its own USB that can be directly connected to a computer for easy photo upload. In addition, the card is rechargeable, which makes it the perfect keep safe for years to come.

Another example is a new collection of cards that we call Illuminotes. These cards feature a unique card fold and a light that is diffused through a frosted vellum window. When opening the card, recipients are presented with a soft glow that enhances the editorial sentiment. Illuminotes offer a charming twist to the traditional greeting card experience.

My last example for today is the greeting card called Flipbook. These cards recall a specific childhood practice, almost everyone remembers, similar to the Flipbook cartoons made in grade school. These cards contain an entertaining animation produced by rapidly flipping thin sheets to reveal a design sure to delight any child. The animation can either tell a story or deliver a birthday message.

With Flipbooks we are introducing the importance of the card giving experience to children. Our creative staff will continue to work hard, to surprise and engage consumers of all ages and to help them make meaningful connections with their families and friends.

It was just over a year-and-a-half ago that we sold our retail store operations and acquired Papyrus and Recycled Paper Greetings. The net effect of these three transactions was to enhance our focus on our core greeting card business. Since the time of the transactions, we have made significant progress in integrating the two businesses, and now the vast majority of the integration work is behind us.

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