American Greetings Corporation F4Q10 (Qtr End 2/28/10) Earnings Call Transcript

| About: American Greetings (AM-OLD)

American Greetings Corporation (NYSE:AM-OLD)

F4Q10 Earnings Call

April 22, 2010 9:00 am ET


Greg Steinberg – Treasurer and Director of Investor Relations

Zev Weiss – Chief Executive Officer

Steve Smith – Chief Financial Officer


Jeff Stein – Soleil Securities

Mimi Noel – Sidoti and Company

Robert Haley – Gabelli and Company


Good day, everyone, and welcome to the American Greetings Corporation fourth quarter fiscal 2010 earnings conference call. Today's call is being recorded. At this time I would like to turn the conference over to Mr. Greg Steinberg. Please go ahead, sir.

Thank you. Good morning, everyone, and welcome to our fourth quarter conference call. I am Greg Steinberg, the company's treasurer; and I help manage our investor relations. Joining me today on the call are Zev Weiss, our CEO; Jeff Weiss, our COO; and Steve Smith, our CFO.

We released our earnings for the fourth quarter fiscal 2010 this morning. If you do not yet have our fourth 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 would 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 will cover three different topics. First, I will share a few thoughts on our fiscal 2010 performance. Second, I will provide a brief update on the status of the integration with and benefits from Recycled Paper Greetings and Papyrus. Finally, I will offer a few comments on our outlook for fiscal year 2011. Steve will then present more details behind our financial results.

I am delighted with our fourth quarter performance as it was the culmination of a successful year, a year in which we realized revenue growth of everyday greeting cards; and we made both operational and strategic changes which have already improved and which we expect will continue to improve our business model. Better yield management, aggressive cost cutting, and portfolio changes were the three largest elements that were adjusted during the year to improve the business model.

As we stated in previous quarters, operationally we continued to better match our production and shipment levels to consumer demand, which removed significant costs from our supply chain and resulted in better yield. We developed and enhanced processes and controls in an effort to sustain these improvements and potentially increase our yield in future years.

A year ago, as the economy faltered, we were extremely aggressive on cost cutting and kept a lid on those costs throughout this fiscal year. We redesigned business processes in order to allow us to operate at a leaner level going forward. Secondly and importantly, the changes we made to our portfolio of businesses and product lines have allowed us to be more focused on our core business. This improved business model contributed to significant margin and cash flow improvements compared to the prior fiscal year.

I am pleased to report that while our full year revenues, holding aside the effects of foreign exchange and the portfolio changes, were essentially flat compared to fiscal 2009, our cash flow from operations less capital expenditures of $171 million more than doubled our initial expectations for the year. Steve will get into details on the numbers in just a few minutes.

Over the last several years, we have reinvested some of our cash flow into our core card business. We believe that the strategic organic investments we made over those several years have enhanced our leadership position in the greeting card category. Some of you will recall that we began investments with in-depth research to understand how and where our consumers liked to shop. We then created products specifically to reflect distinct lifestyles and deliver the product in new formats to make it easier for consumers to find the perfect card.

These organic investments have been critical to our recent performance in retail. We have and will continually develop new products that meet or exceed consumers' expectations when they shop the greeting card aisle. Let me share with you a few examples of the type of investments we have made and how those investments are appearing at retail.

Over the past year, we shared with you how we have expanded our use of technology in greeting cards to further engage the consumer. We have taken the use of music in cards to the next level. Examples include recordable greeting cards that allow the consumer to personalize the greeting by adding their own voice message on high quality audio cards whose music is synchronized with lights and small motions in order to engage the recipient's multiple senses.

Our team also brought to market what we believe is the first ever digital slide show greeting card that includes a small LCD screen that holds up to 50 digital images. We piloted this digital slide show greeting card during the Christmas season, and the retailer and consumer response was excellent.

Lastly, since the start of fiscal 2011 we unveiled the latest innovation in the card aisle with high definition lenticular cards. The lenticular format transforms flat art into impressive visual landscapes that virtually jump off the page, essentially a three dimensional card.

In addition to the use of technology, we identified an opportunity to bring more contemporary artists to the greeting card category in order to reach additional consumers. As part of this effort, we announced last fall our exclusive partnership with country and pop music superstar Taylor Swift. Her cards are now available at select retail locations and offer traditional values inspired by Taylor's personal flair and are being purchased by enthusiastic fans of her writing style.

All these new products have been developed with an important goal in mind, to help people connect with each other, enhance their greeting card experience, and share life's special moments.

As part of our strategy to enhance our leadership position in the greeting card category, we not only made organic investments in our card business, we changed the mix of businesses through divestitures and acquisitions. During the year, we sold our retail store business, approximately 340 specialty retail stores, thereby allowing us to enhance our focus on our core business.

In addition, we acquired both Papyrus and Recycled Paper Greetings, which is often referred to as RPG. These acquisitions bring together the strengths of American Greetings, RPG, and Papyrus to satisfy the nearly full range of consumer needs to help them connect with friends and loved ones. RPG will enhance our ability to deliver witty and topical content printed on recycled paper. Papyrus will help consumers celebrate life's special moments with modern and elegant designs.

Our goal with RPG and Papyrus is to protect what makes their products unique, particularly their creative models. We recognize that preserving the essence of RPG and Papyrus does not come without costs. We understand and respect the creative models they use. We intend to keep RPG and Papyrus as separate companies and leverage our economies of scale to benefit the consolidated group over time.

Let me now shift gears from elaborating on the investments we have made to share with you the status of the integration with RPG and Papyrus. We have teams of associates working diligently on the integration process. At this time, we remain on time and on budget. Last quarter, we estimated a future earnings contribution from the two acquisitions due primarily to levering the scale of our overall supply chain and back office functions to be an annual run rate of $15 million to $20 million of operating income.

We also shared that our estimate for one time cash costs associated with the integration would be about $20 million. With a few million dollars spent during fiscal 2010, there was a balance paid out over the subsequent 12 months. We believe these estimates are still reasonable.

Let me now share with you some thoughts about our outlook for revenue and cash flow for fiscal year 2011. While fiscal year 2010 was an outstanding year and the strategic and operational changes we made are encouraging, we are a bit more cautious as we look to the future. We expect our consolidated revenue to be down slightly in the neighborhood of 1% to 2%. This decline is driven by our expectation of reduced party good products as a result of the transaction with Amscan.

We expect our full year cash flow from operations less capital expenditures to be around $125 million. The $125 million estimate includes a modest benefit from the combination of taxes, working capital, and deferred costs as well as anticipated cash costs associated with the two integration efforts. We expect our capital expenditures to be around $40 million. As we evaluate future uses of cash, we will continue to consider all options for capital deployment including growth options, additional capital expenditures, share repurchases, and debt reduction.

Before I pass the call on to Steve, I would like to make one last comment. I want to thank our associates for their commitment and teamwork the last few years. They worked exceptionally hard to help simultaneously execute several major strategic changes and to significantly improve our operating results. Without their efforts, we wouldn't be where we are today. Now let me turn the call over to Steve, who will provide a detailed review of the quarter; and then we'll take your questions. Steve.

Steve Smith

Thanks, Zev. I have three components to my prepared remarks today. I will start with comments on a few larger items that impacted our consolidated results this quarter and also the full year. Then I will share a review of our reported segments. Finally, a quick walk through a few key components of our financials. We will then open the line for questions.

As Zev mentioned, we had a good fourth quarter. Similar to the last few quarters, there were two primary reasons driving this improved performance. First, the benefits of achieving better yield including lower supply chain and scrap costs; and second, reduced overhead costs due to the actions we took at the end of the last fiscal year.

Our consolidated revenue of $426 million was up almost $4 million or 1% from last year's fourth quarter revenue of $423 million. Included in our reported revenue this quarter was a benefit from foreign exchange of almost $11 million versus the prior year's fourth quarter. Our revenue was adversely affected due to the net effect of divestitures and acquisitions.

We divested the retail business during the year, and that revenue loss was only partially offset by the revenue picked up from the RPG and Papyrus acquisitions. The net revenue lost due to these portfolio changes was about $24 million versus the prior year's fourth quarter. So, holding aside both the impact of foreign change as well as the net impact of the transactions I just mentioned, revenue increased approximately $16 million or about 4% for the fourth fiscal quarter versus the prior year's fourth quarter, primarily driven by improvements in North America.

Our operating income of $36 million was about $93 million better than the operating loss of $58 million in the prior year's fourth quarter.

There are a handful of larger items that affected this year's fourth quarter earnings that I would like to identify. First, this year's fourth quarter operating income included a $19 million charge related to the settlement of a lawsuit originally filed in 2008 by RPGI, the former indirect parent company of RPG. The parties reached a negotiated settlement during the quarter.

During the quarter, we also recognized charges of $12 million associated with the distribution model changes we made in our Mexican operations.

Third, we had severance costs of about $6 million in the quarter, which includes severance related to the closure of our party goods manufacturing facility.

Partially offsetting these three items is a net $21 million benefit. The $21 million benefit includes a $34 million gain related to the agreement with Amscan and a $13 million impairment related to our exiting of the party goods manufacturing facility. These amounts do not include the severance I just mentioned.

Finally, we also recognized $3 million of benefit related to the liquidation of our interactive business in France.

Holding aside these items, operating income for this fiscal quarter was approximately $49 million. In the prior period, we reported an operating loss of almost $58 million. Included in the prior year's loss were three large items.

Specifically, last year's fourth quarter included goodwill impairment charges of $47 million, expenses in our licensing business related to film based production costs of about $16 million, and a severance charge of $8 million. Holding aside these items, operating income in the prior year's fourth quarter was about $13 million. The year-over-year improvement of roughly $36 million is best explained at the segment level.

Before I move into the segment level details, I would like to speak very briefly about our full year results. Full year revenue of $1.6 billion was $55 million or 3% lower than the last fiscal year. Foreign exchange negatively affected revenue by about $31 million. In addition, revenue was adversely affected by the divestiture of the retail business. However, there was a revenue pick up due to the RPG and Papyrus acquisitions.

The revenue lost due to these portfolio changes was about $29 million. So holding aside both the $31 million drag due to foreign exchange, as well as the net drag of $29 million due to the transactions, revenue was up slightly compared to the prior year by about $5 million.

We reported full year operating income of $139 million, which translated ultimately to $2.03 per fully diluted share. As I did for the fourth quarter, I will walk you through a few of the major items that impacted our earnings during the full fiscal year. First, this year's operating income included a $24 million charge related to the settlement of a lawsuit including $19 million in the fourth quarter.

Second, we had charges of $18 million associated with the distribution model changes we made in our Mexican operations, which included employee termination costs and other shutdown related costs.

Third, we recognized severance costs of about $9 million. Fourth, we recognized a $29 million loss related to the divestiture of our retail business earlier in the fiscal year.

Partially offsetting these items is both a $21 million net benefit related to the party goods transaction and a $3 million benefit related to the liquidation of our interactive business in France. The full year also benefited from a $13 million [LIFO] liquidation as well as $7 million of income associated with the legacy insurance program.

Holding aside these items, operating income was approximately $175 million, a very solid year and well above our beginning of the year expectations.

Now I will turn exclusively to the fourth quarter to share segment results. As a reminder, we no longer have a retail operations segment as we divested that business during fiscal 2010's first quarter. For comparison purposes, I would note that in fiscal 2009's fourth quarter, our retail operations reported revenues of approximately $60 million and the segment was essentially breakeven at the operating income line.

Our North American segment's revenues of $311 million were up about $52 million or about 20% versus the prior year's fourth quarter revenue of $259 million. The revenue increase was principally driven by the benefit of $36 million of RPG and Papyrus revenues, which we did not have, in the prior year's fourth fiscal quarter.

Holding aside the benefit from the acquired companies, revenues were up about $16 million or about 6% driven by improved performance within our everyday greeting cards. I should note, however, that our performance in last year's fourth quarter was depressed by the very challenging economic environment at that time.

Our North American segment earnings of $70 million were up $100 million versus the prior year's segment loss of $31 million. During the prior year, this segment recognized a goodwill impairment of $48 million. This year's results include charges of $12 million associated with the distribution model changes made in our Mexican operations.

However, this year also included a $21 million net benefit related to the party goods transaction. Holding aside these items, segment earnings were about $61 million in the current year compared to about $17 million in the prior year, an improvement of approximately $44 million quarter on quarter.

The earnings improvement was driven by a combination of the increased sales of our everyday greetings, continued benefit from improved yield, and the realization of cost reduction initiatives put in place near the end of last fiscal year. Improved yield means that we reduced excess volumes in the system by producing a more precise mix of what consumers desire. As a result, the company yielded manufacturing and distribution efficiencies.

On the cost side, due to the difficult economic conditions last year, we were fairly aggressive in reducing head count and have continued to be vigilant on overhead costs.

Switching now to our international segment, revenues were about $55 million, which is an increase of $2 million versus the prior year. Similar to last quarter, this increase was driven primarily by an improvement in non-card product sales. Segment earnings improved $10 million versus the prior year quarter. This year, segment earnings were about $4 million compared to a segment loss of $6 million in the prior year period, which had included about $2 million of severance.

Last year was extremely challenging for our international business. Our international team worked hard to reorganize the group in order to reduce its overhead. We are now seeing some of those benefits in their financial results.

Let me now move from the social expression segments to our interactive segment. Revenues were $23 million, which is a $2 million increase over the prior year period driven by e-card subscriptions. Segment earnings were $6 million this year compared to a loss of $1 million in the prior year. This year we recognized the benefit of $3 million related to the liquidation of interactive business in France.

Holding aside the $3 million benefit, earnings improved $4 million. The improvement is related to the increased revenue and the benefits from cost reduction actions taken last year.

Let me shift from the segment analysis to briefly comment on the status of our licensing performance. Licensing revenue for the quarter, which is reported on our income statement within other revenue, was almost $18 million, down about $1 million versus the prior year.

Licensing expenses were $11 million this year, down $18 million compared to last year. Recall that the prior year included charges of $16 million related to film based production costs. So for the fourth quarter, the company's net licensing effort or revenues less expenses improved about $1 million quarter on quarter excluding the film based production costs from the prior period.

Now let me move to the third component of my comments today, a review of several of the key components of our financial statements. The company's manufacturing, labor, and other production costs, or MLOPC, were down about $36 million compared to the last year's fourth quarter. Improved yield and product mix were the primary drivers, specifically lower volumes, improved plant efficiencies, and less scrap compared to the last year.

As we have discussed the last few quarters, our supply chain continues to operate more efficiently as we reduced excess volumes in the system. While last year we incurred $16 million of charges related to film production costs, we did not repeat those kinds of charges this year. However, this year we did incur $13 million of impairments related to the wind down of our party goods manufacturing facility.

Selling, distribution, and marketing, or SD&M costs were down about $20 million versus the prior year's fourth quarter. In this line item, you continue to see how the portfolio changes since February of 2009 have altered our financial statements. About 75% of the reduction in SD&M expenses was the net result of exiting our retail store operations, partially offset by the acquisitions of RPG and Papyrus. The balance of the $20 million reduction in expense was driven by improved yield and cost reduction efforts.

The administrative and general expenses were up $39 million versus the prior year's fourth quarter. Two items drove almost all the variance. First, due to better than expected performance this year we recognized extra variable compensation expense while last year we recognized almost none. The change in the variable compensation was about $18 million. The second item causing the large variance was a $19 million expense related to the settlement of a lawsuit.

On the other operating income line, we recorded a benefit of $26 million this quarter. This $26 million benefit was the result of three items: First, a $34 million gain related to the party goods transaction; second, a benefit of $3 million related to the liquidation of the business in France; and third, a charge of $11 million associated with the distribution model changes made in our Mexican operations.

Let's now shift gears from the review of the income statement to take a brief look at three key components of our balance sheet. On our balance sheet, accounts receivable are about $58 million higher than the prior year. The two largest reasons for the increase are increased revenue and the acquisitions of RPG and Papyrus.

The increased revenue within North American card businesses and the acquisitions of RPG and Papyrus accounted for approximately one-half of the AR increase. The balance of the increase was driven by timing of collections compared to the prior year in both North America and foreign countries.

Inventories decreased by $31 million compared to the prior year. We had more efficient inventory management across almost all of our product line as we had relatively high levels of inventory in the prior year. I should note for you that the inventory benefit from the sale of our retail business was essentially offset by the incremental inventory related to the RPG and Papyrus acquisitions.

The last item I would like to comment on is accounts payable. Accounts payable were down about $22 million at the end of the quarter compared to the prior year. Just over one-third of the reduction is the result of lower spending. The balance was simply timing of payments compared to the prior year.

That concludes our prepared comments for today. I would now like to turn the call over to the operator to handle our question-and-answer period.

Question-and-Answer Session


Thank you, Mr. Smith. (Operator Instructions) Your first question comes from Jeff Stein – Soleil Securities.

Jeff Stein – Soleil Securities

Morning, guys, congratulations. Great quarter. Couple things. First of all, wondering if you could quantify for us the impact of the sales of the party goods business in terms of what it contributed to revenues for the year and how much of that revenue may have crept into the fourth quarter so we can use that going forward?

Steve Smith

Sure, Jeff, we would like to give you just kind of a general sense of that rather than very specific figures. We haven't typically broken out the segment information that we share. In the fourth quarter, we had a revenue of a few million dollars. Let me start with the year, first. For the year, revenues were in the $40 millionish range for the year. I don't know if we can go into the profitability of the segment, Jeff, given the constraints of the agreement we have with the party to whom we sold the business.

Jeff Stein – Soleil Securities

That's quite all right. You are talking though revenues about $2 million in the fourth quarter and $40 million?

Steve Smith

No, a few million dollars. I have to turn to my colleagues and see if they have an exact figure. I don't have it with me, Jeff.

Jeff Stein – Soleil Securities

Okay. So even if you back that out, I am kind of curious. It would seem excluding that would you expect revenue growth to be positive for the new fiscal year? Because it sounds like you are being fairly cautious. I am wondering does it have anything to do with either account changes, consolidations in the retail marketplace, or just generally caution on your part?

Zev Weiss

I think what we're saying is barring the party goods revenue, our expectations are relatively flat. I think right now when we look at the revenue side and really the whole financial side, probably the only thing that is causing us to be somewhat cautious is given the degree of execution we have ahead of us with all the integration work that is happening as we speak.

Jeff Stein – Soleil Securities

What inning are you in? I know companies love that question. What inning are you in on the integration? And what would you see as the biggest hurdles in completing the integration?

Steve Smith

I don't know what inning we're in. I can tell you that our expectation is to be very far along by the end of this year. A lot of the execution work is happening really right now as we speak.

Jeff Stein – Soleil Securities

And what would you say are some of the challenges you're facing, if any, in the compression?

Zev Weiss

I think the biggest challenges that you're talking about two different companies at the exact, when the integration effort is involving two different companies at the exact same time. And we're still just sort of done with the exiting of retail. And there was a lot of work on our part also helping with the integration efforts there with the company that bought that. The combination of really of those three was and still is quite a bit of activity for the group.

Jeff Stein – Soleil Securities

Got it. Can you talk a little bit about technology cards in terms of the impact that has had on your business? I know historically you have stated it's been under 5% of your business. But I have noticed recently that at least in some of the new designs your price points are much higher than they were a year ago. It seems like a year ago you were mainly at $4.99. Now I am seeing cards out there $5.99 to $7.99. Is the mix, I presume the mix is favorable to you and is it now becoming more a material percentage of your total business?

Zev Weiss

I think when you look at some of the episodes of some of the cards, it is correct what you are saying. That as you move away from just music cards, which were predominantly priced in that $4.99 range, we now have others that are above that. When you take a step back and you look at in general what's going on with our music and technology, there's really just a shift happening where there are fewer music cards being sold.

Those are being made up with the cards that you are referring to and some of the ones that we refer to in the call that you are seeing out in the marketplace. I think overall from a revenue perspective and from a unit perspective, it's relatively flat. It's just a mix shift underneath that.

Jeff Stein – Soleil Securities

You are saying that revenues in technology cards year on year were about flat?

Zev Weiss

They are relatively flat.

Jeff Stein – Soleil Securities

How about profitability of technology cards? On a per unit basis if you're getting a higher price, does that improve the economics of selling these products?

Zev Weiss

It's all on a case-by-case basis. It all depends on the underlying cost associated with those cards that you see with the higher price points. With the LCD cards that we came out with at Christmas, the price point was higher; but obviously putting an LCD screen in a card has a significant amount of cost associated with it.

You can't take a general statement there. You have to look at every one of the cards. I think, overall, though where the initial roll out of music were quite challenging for us from a cost perspective, a lot of the negative factors that were contributing to that are now much more under control.

Jeff Stein – Soleil Securities

One last question. This gets back to my initial question. RPG and Papyrus are still relatively small in the grand scheme of things, relative to your larger everyday greeting card business. If you're looking at kind of flattish revenues for 2010, excluding the sale of the party goods business, what are factors that would cause you to take such a conservative outlook given the fact that retail foot traffic is up sharply?

Zev Weiss

I think for us the thing that, again, I think is causing us just to be the most, the single biggest thing that's causing us to be cautious is the degree of execution that we're embarking on. Again, what we're doing with RPG and Papyrus at the same time, and just getting off the retail execution. There's a lot of complex execution that needs to happen. Again, it's happening as we speak. I think we'll feel a lot more comfortable when we get on the other end of that.


(Operator Instructions) Your next question comes from Mimi Noel – Sidoti and Company.

Mimi Noel – Sidoti and Company

Good morning. Most of my questions have been answered, but I do have one, two part. First, Zev, can you comment on the seams you saw among your consumers in 2010? As the year ended any sort of shifting you might have seen from your consumers on a channel basis primarily?

Zev Weiss

You're asking about the, what was sort of the consumers' mind set as the year was ending relative to the economy? Is that like maybe where it was versus the beginning of the year?

Mimi Noel – Sidoti and Company

More so not just their psychology, but their behavior.

Zev Weiss

It's interesting. I think what we saw this past year was much more normal behavior from our consumers than perhaps what we were expecting as we were heading into the beginning of the year last year. Part of that has to do with, I think, how things looked when the economic trouble started, maybe back in September about a year and a half ago. There were things that were causing us to be much more concerned, and it definitely leveled off and became much more normal as we were starting into the beginning of last fiscal year.

I think from a consumer perspective, a lot of what we saw was more typical than I think we were expecting. I think you continue to see some of the channel shift happening that has been going on for the last 5 or so years, particularly with some of the reduction perhaps in some of the specialty channels. And then some of the share being picked up in mass retail. That's a trend that's been going on for a long time. I think we saw that last year as well.

Mimi Noel – Sidoti and Company

Then, the other thing I wanted to ask you about, and I haven't seen this with my own eyes, but I heard of sort of the store within a store concept with major department store retailers. Is that something that you are in fact doing?

Zev Weiss

We have been doing that. If it's what I believe you're referring to is sort of almost like a boutique store within a store in department stores. That is something that's going on. But it's something that we've been working on for the past couple of years.

Mimi Noel – Sidoti and Company

Is it in a broad scale roll out now and I just haven't noticed it? From store to store or?

Zev Weiss

I don't think it's any more unique than what we've been doing for the past couple of years.

Mimi Noel – Sidoti and Company

That's all the questions I had for now, thank you.


(Operator Instructions) We will take a follow up question from Jeff Stein – Soleil Securities.

Jeff Stein – Soleil Securities

Question on yield. You guys made a tremendous improvement this past year in your gross margins because of the improved execution in yield. Is there still room for additional improvement?

Zev Weiss

We think there is opportunity to continue to improve. I think with yield, as with a lot of cost savings efforts, the first steps are always easier than the next steps. We don't by any means think that we're done; but we do think that as we take future steps, it's going to be a bit more challenging.

Jeff Stein – Soleil Securities

In terms of kind of getting to the next level, do you see that as a progression that will continue into the current fiscal year or are there some investments you need to make to take it to the next level?

Zev Weiss

I don't think like you put from a technology perspective, if that's what you are referring to in terms of investments, I think it's a question of staying disciplined and every year getting better and better. Again, it doesn't mean that it will happen uniformly. Especially as, I think, we go forward it will be more challenging. But we are not at a resting place by any means.

Jeff Stein – Soleil Securities

Steve, you mentioned in your presentation that you had a $13 million [LIFO] liquidation for the year. Can you kind of parse that out for us on a quarter-by-quarter basis?

Steve Smith

It's roughly spread evenly across the four quarters, Jeff. Around $3 millionish per quarter of the four quarters.


We will take a follow up question from Mimi Noel – Sidoti and Company.

Mimi Noel – Sidoti and Company

Thanks. I missed it on the call. You reaffirmed your outlook for cash charges associated with the integration during fiscal 2011, would you repeat that for me?

Steve Smith

What we were saying in the script was that the total amount of charges over the program was to be around $20 million.

Mimi Noel – Sidoti and Company

Okay. And you said you spent a few million in fiscal 2010?

Steve Smith


Mimi Noel – Sidoti and Company

But can you get any more specific than that?

Steve Smith

No. Just a few million dollars of the costs were incurred last fiscal, Mimi. That's all we're sharing.

Mimi Noel – Sidoti and Company

Okay. I think I am all set. Thank you.


Your next question comes from Robert Haley – Gabelli and Company.

Robert Haley – Gabelli and Company

Good morning. Thanks for the question. You mentioned in some of your comments impacts to free cash flow outlook for the year being taxes, working capital, and deferred costs. I am wondering if you could just give some more details around those, which are puts and takes and maybe quantify?

Greg Steinberg

Hi, Rob, it's Greg Steinberg. We generally don't quantify at that level of detail the differences between deferred costs, taxes, and working capital. We saw quite a nice benefit from most of those this fiscal year, and you have seen that over a number of years historically. We are expecting some of that to continue, although perhaps at a lesser amount than you've seen this past year. We prefer not to get into the level of detail as to each of the line items.


It appears we have no further questions at this time. I would like to turn the conference back over to Mr. Steinberg for any additional closing remarks.

Greg Steinberg

Thank you. That concludes the question-and-answer portion of today's conference call. We look forward to speaking with you again at our first quarter conference call fiscal year 2011, which is expected to occur in late June. We thank you for joining us this morning. That ends today's call.


Thank you. As a reminder, that does conclude today's conference. We want to thank you for your participation today.

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