Case Study 6

profilenorth
CaseStudy6Workbook-Student.xlsx
Home>Business & Finance homework help>Case Study 6

Export Summary

This document was exported from Numbers. Each table was converted to an Excel worksheet. All other objects on each Numbers sheet were placed on separate worksheets. Please be aware that formula calculations may differ in Excel.
Numbers Sheet Name Numbers Table Name Excel Worksheet Name
Title Page
Table 1 Title Page
Exh 1
Table 1 Exh 1
Exh 2
Table 1 Exh 2
Exh 3
Table 1 Exh 3
Exh 4
Table 1 Exh 4
Exh 5
Table 1 Exh 5
Exh 6
Table 1 Exh 6
Exh 6 (Continued)
Table 1 Exh 6 (Continued)
Exh 7
Table 1 Exh 7
Exh 8
Table 1 Exh 8
Exh 9
Table 1 Exh 9

Title Page

This spreadsheet supports STUDENT analysis of the case “American Greetings” (UVA-F-1693).
This spreadsheet was prepared by Michael J. Schill, Associate Professor of Business Administration. Copyright © 2013 by the University of Virginia Darden School Foundation, Charlottesville, VA. All rights reserved. For customer service inquiries, send an e-mail [email protected]. No part of this publication may be reproduced, stored in a retrieval system, posted to the Internet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of the Darden School Foundation.
Rev. Feb. 6, 2014

&"Helvetica Neue,Regular"&12&K000000&P

Exh 1

Exhibit 1
AMERICAN GREETINGS
American Greetings Share Price
(monthly close)
Closing Adjusted Price for American Greetings Shares
Dec"-"09 $21
Jan"-"10 $17
Feb"-"10 $18
Mar"-"10 $20
Apr"-"10 $23
May"-"10 $22
Jun"-"10 $18
Jul"-"10 $20
Aug"-"10 $18
Sep"-"10 $18
Oct"-"10 $19
Nov"-"10 $19
Dec"-"10 $22
Jan"-"11 $21
Feb"-"11 $21
Mar"-"11 $23
Apr"-"11 $24
May"-"11 $23
Jun"-"11 $23
Jul"-"11 $22
Aug"-"11 $21
Sep"-"11 $18
Oct"-"11 $16
Nov"-"11 $17
Dec"-"11 $13

&"Helvetica Neue,Regular"&12&K000000&P

Closing Adjusted Price for American Greetings Shares

December-09 January-10 February-10 March-10 April-10 May-10 June-10 July-10 August-10 September-10 October-10 November-10 December-10 January-11 February-11 March-11 April-11 May-11 June-11 July-11 August-11 September-11 October-11 November-11 December-11 20.570000 17.450000 18.000000 19.800000 23.330000 22.400000 17.950000 19.600000 18.460000 17.920000 18.670000 19.340000 21.500000 21.080000 21.000000 22.890000 24.010000 23.430000 23.460000 21.780000 20.850000 18.170000 15.870000 16.840000 12.510000

Exh 2

Exhibit 2
AMERICAN GREETINGS
American Greetings Income Statement, December 2011 (in millions of dollars)
2008 2009 2010 2011E
(Feb 2009) (Feb 2010) (Feb 2011) (Feb 2012)
Total American Greetings Figures
Total Revenue 1,691 1,636 1,593 1,677
Material, Labor, and Other Pruduction Costs 810 713 682 743
Selling, Distribution, and Marketing Expenses 619 508 478 526
Administrative and General Expenses 226 276 261 258
Goodwill and Other Intangible Asset Impairments 290 0 0 0
Other Operating Expenses 1 0 3 (6)
Operating Income (253) 139 175 157
Net Interest and Other Nonoperating Expenses 22 18 19 28
Income Before Income Tax Expense (275) 121 156 129
Income Tax Expense (47) 39 69 47
Net Income (228) 82 87 82
Earnings Per Share (Basic) (4.89) 2.07 2.18 2.22
Dividends per Share 0.60 0.36 0.56 0.60
By Business Unit
Operating Segment Net Sales
North American Social Expression Products 1,095 1,235 1,191 1,215
International Social Expression Products 271 254 262 344
Retail Operations 179 12
AG Interactive 83 80 78 68
Operating Segment Earnings
North American Social Expression Products 70 236 218 148
International Social Expression Products (78) 17 20 20
Retail Operations (19) (35)
AG Interactive (162) 11 14 14
Total Revenue by Product Category
Everyday Greeting Cards 704 764 753 823
Seasonal Greeting Cards 357 369 377 408
Gift Packaging 240 221 223 239
Other Revenue 44 38 32 32
All Other Products 345 244 207 176
Note: Fiscal year ends February of subsequent year.
Source: Company accounts; management and case writer estimates

&"Helvetica Neue,Regular"&12&K000000&P

Exh 3

Exhibit 3
AMERICAN GREETINGS
American Greetings Balance Sheet (in millions of dollars)
2009 2010 2011E
(Feb 2010) (Feb 2011) (Feb 2012)
Cash and Cash Equivalents 138 216 172
Trade Accounts Receivable 136 120 130
Inventories 164 180 190
Prepaid Expenses 148 128 131
Other Current Assets 94 72 54
Total Current Assets 679 716 677
Net Property, Plant, and Equipment and Other Assets 850 832 859
Total Assets 1,529 1,547 1,536
Debt Due within One Year 1 0 0
Accounts Payable 95 87 87
Other Current Liabilities 272 245 255
Current Liabilities 369 332 343
Long-Term Debt 329 233 235
Other Liabilities 196 219 206
Shareholders’ Equity 636 763 752
Total Liabilities and Shareholders’ Equity 1,529 1,547 1,536
Note: Fiscal year ends February of subsequent year.
Data source: Company accounts; management and case writer estimates.

&"Helvetica Neue,Regular"&12&K000000&P

Exh 4

Exhibit 4
AMERICAN GREETINGS
Total U.S. Greeting Cards Sales (Actual and Forecast)
Sales at current prices
in millions of dollars % annual change
2005 6,537
2006 6,420 -1.8
2007 6,285 -2.1
2008 6,266 -0.3
2009 6,149 -1.9
2010 5,935 -3.5
2011 (est.) 5,838 -1.6
2012 (est.) 5,711 -2.2
2013 (est.) 5,596 -2.0
2014 (est.) 5,478 -2.1
2015 (est.) 5,359 -2.2
Data source: Mintel, based on U.S. Census Bureau, Economic Census.

&"Helvetica Neue,Regular"&12&K000000&P

Exh 5

Exhibit 5
AMERICAN GREETINGS
Feelings About e-Cards: Usage Change among 2,000 Respondents, October 2010
By Age Category
All 18-24 25-34 35-44 45-54 55-64 65+
In the last year, I have sent more e-cards than I used to. 22% 17% 26% 20% 22% 21% 24%
In the last year, I have sent fewer e-cards than I used to because I send greetings over social networking sites such as Facebook. 20% 26% 27% 21% 19% 15% 13%
Data source: Mintel.

&"Helvetica Neue,Regular"&12&K000000&P

Exh 6

Exhibit 6
AMERICAN GREETINGS
Comparable Firms, End of 2011 (in millions of dollars except share price)
Share Price Shares Outstanding Total Cash Total Debt Enterprise Value Revenue EBITDA EBITDA Multiple*
American Greetings 12.51 38.3 86 235 714 1,660 204 3.5
Blyth 56.80 8.2 182 101 568 984 48 11.7
Consolidated Graphics 48.28 10.2 7 197 692 1,050 122 5.6
CSS Industries 19.92 9.7 10 0 194 453 30 6.5
Deluxe 22.76 50.9 31 742 1,901 1,420 359 5.3
Hallmark NA NA NA NA NA 4,100 NA NA
Lancaster Colony 69.34 27.3 162 0 1,890 1,090 156 12.2
Meredith 32.65 44.8 26 250 1,712 1,350 240 7.1
Scholastic 29.97 31.1 114 215 1,145 1,950 189 6.0
ROA ROE Beta Bond Rating**
American Greetings 7% 11% 1.63 BB+
Blyth 4% 9% 1.60 B
Consolidated Graphics 5% 10% 1.45 BB
CSS Industries 4% 2% 1.36
Deluxe 13% 55% 1.85 B
Hallmark NA NA NA
Lancaster Colony 14% 19% 0.42
Meredith 7% 15% 1.75 BB
Scholastic 6% 8% 1.04 BB-
* EBITDA miltiple is defined as Enterprise Value divided by EBITDA
** The ratings for Cons. Graphics and Meredith are estimated by case writer.
Data source: Yahoo! Finance, Standard & Poor’s, Mergeant.

&"Helvetica Neue,Regular"&12&K000000&P

Exh 6 (Continued)

Exhibit 6 (Continued)
AMERICAN GREETINGS
Comparable Firms
Blyth Global marketer of candles, gourmet foods, weight management products, holiday cards, photo albums, and houseware products
Consolidated Graphics Provides commercial printing services in North America, including brochures, shareholder communications, trading cards, calendars, catalogs, and greeting cards
CSS Industries Designs, produces, and sells social expression products in North America, including greeting cards, gift wrapping, Valentines cards, Halloween costumes, and stationery
Deluxe Provides printed products to financial institutions and small businesses worldwide, including forms, checks, envelopes, and greeting cards
Lancaster Colony Manufactures and markets specialty foods, glassware, and candles in the United States
Meredith Licenses brands and publishes magazines (e.g., Better Homes and Gardens, Ladies’ Home Journal, FamilyFun) in the United States
Scholastic Publishes and distributes children’s books and other media in the United States
Data source: Case writer descriptions.

&"Helvetica Neue,Regular"&12&K000000&P

Exh 7

Exhibit 7
AMERICAN GREETINGS
American Greetings Operating Performance
2005 2006 2007 2008 2009 2010 2011
Revenue Growth 0% -7% -1% -5% -3% -2% 7%
Operating Margin 8% 2% 5% -1% 6% 9% 9%
Note: Fiscal year ends February of subsequent year.
Data source: Company financial statements.

&"Helvetica Neue,Regular"&12&K000000&P

Revenue Growth

2005 2006 2007 2008 2009 2010 2011 0.002084 -0.069596 -0.007910 -0.048764 -0.029215 -0.023838 0.074926 Operating Margin

2005 2006 2007 2008 2009 2010 2011 0.08 1889 0.022246 0.047279 -0.005321 0.063342 0.089155 0.089983

Exh 8

Exhibit 8
AMERICAN GREETINGS
Financial Forecast Assumptions
Actual *********** Forecast ***********
2011 2012 2013 2014 2015
Bullish Scenario
Revenue Growth 5.3% 1.0% 1.5% 2.0% 2.5%
Operating Margin 9.4% 9.0% 9.0% 9.0% 9.0%
Net Working Capital Turnover 5.02 6.00 6.50 7.00 7.50
Fixed Asset Turnover 1.95 1.95 1.95 1.95 1.95
Bearish Scenario
Revenue Growth 5.3% 0.0% 0.0% 0.0% 0.0%
Operating Margin 9.4% 8.0% 7.0% 6.0% 5.0%
Net Working Capital Turnover 5.02 6.00 6.50 7.00 7.50
Fixed Asset Turnover 1.95 1.95 1.95 1.95 1.95
Note: The ratios are defined in the following manner:
Revenue Growth is the annual percentage change in total revenue
Operating Margin is operating income divided by total revenue
Net Working Capital Turnover is total revenue divided by net working capital
where net working capital is current assets less current liabilities
Fixed Asset Turnover is total revenue divided by net PP&E and other assets
Data source: Case writer estimates.

&"Helvetica Neue,Regular"&12&K000000&P

Exh 9

Exhibit 9
AMERICAN GREETINGS
Capital Market Data
Yield
30-Day Treasury Bill 0.1%
10-Year Treasury Bond 2.8%
10-Year Corporate Bonds of Industrial Companies
AAA 2.8%
AA 2.9%
A+ 3.2%
A 3.3%
A- 3.5%
BBB+ 3.8%
BBB 4.1%
BBB- 4.6%
BB+ 5.8%
BB 6.5%
BB- 6.5%
B+ 6.8%
B 8.4%
B- 9.0%
Historical Market Risk Premium
Equity Market Index Less Government Debt 5.5%
5-Year Forecast
U.S. Real GDP Annual Growth Rate 3.3%
U.S. GDP Annual Deflator Rate 1.8%
Consumer Price Index Annual Rate 2.2%
Data source: Bloomberg, Value Line Investment Survey, and case writer estimates.

&"Helvetica Neue,Regular"&12&K000000&P