A penny saved is a penny earned.

Investors might want to send that message to

American Greetings

(AM) - Get Report

, after the greeting card company Tuesday reported sharply-lower first-quarter earnings as it repurchased debt.

The Cleveland-based company had net income of $4.2 million, or 6 cents a share, on revenue of $445.7 million vs. $19.7 million, or 27 cents a share, on revenue of $454.3 million in the year-ago period.

During the quarter ended May 31, the company had after-tax costs of $23.9 million because of debt repurchases totaling $186.2 million.

Excluding items, the company earned $28.1 million compared with $22.5 million a year ago. EPS figures were not included in the company's news release or financial statement.

Excluding items, analysts were expecting the company to earn $25.6 million, or 33 cents a share, on revenue of $465 million, according to Thomson First Call.

During the quarter, American Greetings completed a tender offer for $186.2 million of its $196.4 million outstanding 11.75% senior subordinated notes due July 2008. "While this initiative reduced net income in the quarter, it will reduce future interest expense and increase strategic and financial flexibility," the company said in a statement.

The company said it has reduced debt by $368 million within a 13-month period, trimming annual interest expense by about $38 million.

The company also offered second-quarter guidance, saying it expected EPS to be "about breakeven." The company lost 15 cents a share in the year-ago period because of what it described as the seasonal nature of the card business. The consensus estimate is for a loss of 8 cents a share.

For the full year, the company forecast earnings of $1.63 to $1.68 a share, excluding the impact of debt restructuring. The consensus view is for EPS of $1.68.

Shares closed at $21.90 Monday.