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This spreadsheet supports STUDENT analysis of the case

,
"AMERICAN GREETINGS" (Case 43)

6-Feb-13
Copyright (C) 2012, by the University of Virginia Darden School Foundation.

Exhibit 1
AMERICAN GREETINGS
American Greetings Share Price (Monthly Close)

Closing Adjusted Price for American Greetings Shares
Dec-09 $21
$30 Jan-10 $17
Feb-10 $18
Mar-10 $20
Apr-10 $23
$25 May-10 $22
Jun-10 $18
Jul-10 $20
Aug-10 $18
$20 Sep-10 $18
Oct-10 $19
Nov-10 $19
Dec-10 $22
$15 Jan-11 $21
Feb-11 $21
Mar-11 $23
Apr-11 $24
$10 May-11 $23
Jun-11 $23
Jul-11 $22
Aug-11 $21
$5 Sep-11 $18
Oct-11 $16
Nov-11 $17
Dec-11 $13
$0
Dec-09 Feb-10 Apr-10 Jun-10 Aug-10 Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-1

pr-11 Jun-11 Aug-11 Oct-11 Dec-11 .

36 0.593 1.095 1.636 1. and Other Pruduction Costs 810 713 682 743 Selling.60 0.22 Dividends per Share 0.5 39. As of December 2011.691 1.50 By Business Unit Operating Segment Net Sales North American Social Expression Products 1.235 1. Distribution. Labor.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 Source: Company accounts.5 40.56 0. Fiscal year ends February of subsequent year) 2008 2009 2010 2011 (Est) (Ends Feb 2012) Total American Greetings Figures Total Revenue 1.60 Average Number of Shares Outstanding (Millions) 46. Management and case writer estimates .677 Material. 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 Non Operating 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.Exhibit 2 AMERICAN GREETINGS American Greetings Income Statement (USD millions.191 1.89) 2.07 2.0 38.18 2.

y of subsequent year) .

94 Years 2009 2010 NWC (CA-CL) 311 358 Sales 1635.91 Fixed Assets 850 832 Change in NWC 48 Change in FA -18 .5% Tax rate 40% Terminal growth rate 1.5% EBIT 136 Less: Inc Tax (40%) 54 Plus: Depreciation 0 Less: Change in NWC (50) Less: Change in Fixed Assests 14 FCF 118 Terminal Value Total FCF 118 Operating Margin 8% 9. American Greetings Value and Stock Price Year 2011 2012 FCF Forecast Sales 1.49% Value of the Company 1041 Value of Debt 235 Value of Equity 806 Stock Price $ 20.677 1702 Growth 1.9 1592.5% Shares outstanding 38.92 1.6 NWC Turnover 5.44 Fixed Assets Turnover 1.26 4.50 WACC 8.

5 1.5% 10.5 7 7.95 1.5% 1.95 859 873 886 899 913 927 (24) (50) (18) (15) (13) 4 27 14 13 13 13 14 .0% 10.95 1.95 1.02 6 6.5% 138 140 142 145 55 56 57 58 0 0 0 0 (18) (15) (13) 4 13 13 13 14 88 86 85 69 1009 88 86 1094 9.5% 1.95 1.0% 2011 2012 2013 2014 2015 LT Growth 334 284 266 251 237 241 1677.95 1.5 7.5% 1.Greetings Value and Stock Price 2013 2014 2015 LT Growth 1728 1754 1780 1807 1.1 1702 1728 1754 1780 1807 5.

0% EBIT 117 Less: Inc Tax (40%) 47 Plus: Depreciation 0 Less: Change in NWC (55) Less: Change in Fixed Assests 1 FCF 124 Terminal Value Total FCF 124 Operating Margin 7% 7% Tax rate 40% Terminal growth rate 0% Shares outstanding 38. American Greetings Value and Stock Price Year 2011 2012 FCF Forecast Sales 1.6 NWC Turnover 5.91 Fixed Assets 850 832 Change in NWC 48 Change in FA -18 .9 1592.49% Value of the Company 830 Value of Debt 235 Value of Equity 596 Stock Price $ 15.47 Years 2009 2010 NWC (CA-CL) 311 358 Sales 1635.50 WACC 8.44 Fixed Assets Turnover 1.677 1677 Growth 0.26 4.92 1.

02 6 6.5 1.Greetings Value and Stock Price 2013 2014 2015 LT Growth 1677 1677 1677 1677 0.5% 6.0% 117 109 109 101 47 44 44 40 0 0 0 0 (22) (18) (16) 0 0 0 0 0 92 84 81 60 711 92 84 793 6.95 1.0% 0.95 1.0% 2011 2012 2013 2014 2015 LT Growth 334 280 258 240 224 224 1677.95 1.1 1677 1677 1677 1677 1677 5.5 7 7.95 1.5% 6.95 859 860 860 860 860 860 (24) (55) (22) (18) (16) - 27 1 0 0 0 0 .0% 0.95 1.5 7.0% 0.

64 .0% EBIT (9% of Sales) 152 Less: Inc Tax (40%) 61 Plus: Depreciation 0 Less: Change in NWC (52) Less: Change in Fixed Assets 10 FCF 134 Terminal Value Total FCF 134 Operating Margin 9% Tax rate 40% Terminal growth rate 3% Shares outstanding 38.677 1694 Growth 1.50 WACC 8.49% Value of the Company 1222 Value of Debt 235 Value of Equity 987 Stock Price $ 25. American Greetings Value and Stock Price Year 2011 2012 FCF Forecast Sales 1.

5% 2.5% 3.Greetings Value and Stock Price 2013 2014 2015 LT Growth 1719 1754 1798 1851 1.0% 2.0% 155 158 162 167 62 63 65 67 0 0 0 0 (18) (14) (11) 7 13 18 22 28 98 91 85 65 1223 98 91 1308 .

6 1. Fiscal year end Febraury 28 of subsequent year) 2009 2010 2011 (Est) (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 57 54 Total Current Assets 679 701 677 Net Property.536 Source: Company accounts.26 4. Management and case writer estimates Years 2009 2010 2011 NWC (CA-CL) 311 358 334 Sales 1635.536 Debt Due within One Year 1 .44 5.91 1.677 NWC Turnover 5.9 1592. - Accounts Payable 95 87 87 Other Current Liabilities 272 255 255 Current Liabilities 369 343 343 Long-term Debt and Other Liabilities 525 441 441 Shareholders' Equity 636 749 752 Total Liabilities and Shareholders' Equity 1.95 Fixed Assets 850 832 859 Change in NWC 48 (24) Change in FA -18 27 .532 1.02 Fixed Assets Turnover 1.533 1.92 1.530 1.529 1.Exhibit 3 AMERICAN GREETINGS American Greetings Balance Sheet (USD millions. Plant and Equipment and Other Assets 850 832 859 Total Assets 1.

95 1.95 1.95 1.5 7 7.5 1.2012 2013 2014 2015 LT Growth 282 265 251 240 247 1694 1719 1754 1798 1851 6 6.95 869 882 899 922 949 (52) (18) (14) (11) 7 10 13 18 22 28 .5 7.95 1.

1 96 2008 6.420 -1.935 -3.2 87 2013 (Est.Exhibit 4 AMERICAN GREETINGS Total U.) 5.S.537 100 2006 6.266 -0.3 96 2009 6.8 98 2007 6.478 -2. Economic Census . Greetiongs Cards Sales (Actual and forecast estimation) Sales at current prices Index $million % annual change 2005 = 100 2005 6.S.149 -1.) 5.0 86 2014 (Est.838 -1.359 -2.2 82 Source: Mintel/based on U.285 -2.1 84 2015 (Est.5 91 2011 (Est.) 5. Census Bureau.6 89 2012 Est.) 5.) 5.711 -2.596 -2.9 94 2010 5.

65 44.15 McCormick & Company 50.651 Blyth 4% 9% 1.250 3.97 31.79 288 15 2.36 Deluxe 13% 55% 1.918.700 650 6708.8% McGraw-Hill 14% 44% 0.57 1.290 2575.05 Scotts Miracle-Gro 46.24 7 197 1.890.60 3.80 8.68 7.38 7.14 RR Donnelley & Sons 14.76 2.900.8% McCormick & Company 9% 24% 0.570 525 4903.21 1.50 450 345 10.73 10 0 453 30 193.958.80 Consolidated Graphics 48.95 Consolidated Graphics 5% 10% 1.34 27.63 BB+ Ba2 Enterprise Value 1. Millions Except Share Price) Mkt Shares Total Capitalizatio Weight of EV/ Share Price Outstanding Cash Total Debt Revenue EBITDA n Total Capital Debt Weight of Equity EBITDA American Greetings 12.29 Fossil 79.70 8.17 1.Exhibit 6 AMERICAN GREETINGS Comparable Firms (End of 2011.13 138 621 2.73 Industry's Average EV/ EBITDA Ratio 8.712.82 193.350 240 1462.15 3.45 CSS Industries 4% 2% 1.07 6.39 7.02 WACC = Re*(E/V) + Rd*(D/V)*(1-T) Scholastic 6% 8% 1.900.38 12.38 714.62 Mkt Premium (given) 5% Lancaster Colony 14% 19% 0. A2 BB+ 5.65 4.250 1.16 48.02 33% 67% 3.25 McGraw-Hill 44.99 CAPM Re = Rf + b x (Rm .96 11.95% Meredith 7% 15% 1.42 133.08 Moody's S&P Bond Bond ROA ROE Beta Rating Rating American GreetingsEstimate American Greetings 7% 11% 1.15 9.43 178.580 431 3141.920.670 12501.66 13.65 CSS Industries 19.Rf) 10.90 567.89 9.76 50.22 182 101 984 48 466.79 26 250 1.762.650 109 392.26 162 0 1.72 5.39 691.69 60.21 12.060 2.4 Fossil 19% 28% 1.97 278.36 61.610 1.00 973 1.73 Central Garden & Pet 8.950 189 930.85 B B1 Marginal Tax (given) 0.36 2.60 Estimate Equity Valu 1.04 28 461 1.05 114 215 1.200 6.28 10.20 Meredith 32.93 31 742 1.51 38.416 Central Garden & Pet 5% 5% 1.49% Scotts Miracle-Gro 10% 20% 0.52 Baa3 Source: Yahoo! Finance .82 6.75 RR Donnelley & Sons 5% -7% 2.37 Lancaster Colony 69.50 Blyth 56.55 B3 Estimate Share Price $ 36.26 Scholastic 29.66 8.820 391 2840.83 128 1.660 204 479.42 10 year Treasury Bond 2.51 Deluxe 22. 8.420 359 1159.39 1.701.145.97 56.92 9.05 73 1.88 5.090 156 1890.99 Tupperware Brands 55.01 852.050 122 494.96 Tupperware Brands 12% 34% 1.04 BB.24 A.32 86 235 1.

Exhibit7 AMERICAN GREETINGS American Greetings Operating Performance (For fiscal year end February 28 of subsequent year) 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% 10% 8% 6% 4% 2% 0% -2% -4% -6% -8% 2005 2006 2007 2008 2009 2010 2011 Revenue growth Operating margin .

0% -2% -4% -6% -8% 2005 2006 2007 2008 2009 2010 2011 Revenue growth Operating margin .

2011 .

2011 .

3% A.9% A+ 3.3% U.5% BBB+ 3.6% BB+ 5.1% 10 year Treasury Bond 2.4% B.S.2% A 3.5% B+ 6. 6.2% Source: Bloomberg. 4.8% BB 6.8% AA 2.8% Consumer Price Index annual rate 2.8% 10-year Corporate Bonds of Industrial Companies AAA 2.8% B 8. 9.0% 5-year forecast U.S. GDP annual deflator rate 1.8% BBB 4. Value Line Investment Survey . Real GDP annual growth rate 3.5% BB. 3.1% BBB.Exhibit 8 AMERICAN GREETINGS Capital Markets Data Yield 30-day Treasury Bill 0.