Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ¨ No x

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

All of the outstanding capital stock of the registrant is held by Century Intermediate Holding Company. As of ~~January~~October 9, 2015, 100 shares of the registrant’s common stock, par value $0.01 per share, were outstanding.


	(Unaudited)												(Unaudited)
	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
	November 28, 2014			November 29, 2013			November 28, 2014			November 29, 2013			August 28, 2015			August 29, 2014			August 28, 2015			August 29, 2014
Net sales	$	508,006		$	502,107		$	1,432,370		$	1,406,319		$	418,611		$	427,090		$	890,503		$	924,364
Other revenue		6,052			5,409			17,697			18,921			2,417			5,335			3,968			11,645

Total revenue		514,058			507,516			1,450,067			1,425,240			421,028			432,425			894,471			936,009
Material, labor and other production costs		249,518			244,829			630,413			625,340			177,985			180,109			373,459			380,895
Selling, distribution and marketing expenses		175,039			177,154			513,132			502,500			153,641			165,834			317,400			338,093
Administrative and general expenses		64,829			74,814			200,974			228,578			59,365			66,850			117,586			136,145
Other operating income – net		(699	)		(2,368	)		(26,495	)		(6,647	)		(7,309	)		(23,828	)		(69,729	)		(25,796	)

Operating income		25,371			13,087			132,043			75,469			37,346			43,460			155,755			106,672
Interest expense		9,533			8,454			27,782			18,199			6,486			9,255			14,599			18,249
Interest income		(2,517	)		(29	)		(2,658	)		(222	)		(84	)		(30	)		(183	)		(141	)
Other non-operating expense (income) – net		833			1,047			(546	)		(4,351	)
Other non-operating income – net														(54	)		(272	)		(992	)		(1,379	)

Income before income tax expense		17,522			3,615			107,465			61,843			30,998			34,507			142,331			89,943
Income tax expense		6,261			310			29,625			30,366			6,518			11,667			45,087			23,364

Net income	$	11,261		$	3,305		$	77,840		$	31,477		$	24,480		$	22,840		$	97,244		$	66,579


	(Unaudited)											(Unaudited)
	Three Months Ended					Nine Months Ended						Three Months Ended						Six Months Ended
	November 28, 2014			November 29, 2013		November 28, 2014			November 29, 2013			August 28, 2015			August 29, 2014			August 28, 2015			August 29, 2014
Net income	$	11,261		$	3,305	$	77,840		$	31,477		$	24,480		$	22,840		$	97,244		$	66,579
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		(15,662	)		9,996		(15,917	)		8,336			(2,351	)		(2,121	)		(4,379	)		(255	)
Pension and postretirement benefit adjustments		173			192		287			1,009			505			137			721			114
Unrealized loss on securities		—			—		—			(4	)
Unrealized (loss) gain on equity securities													(10,133	)		—			34,477			—

Other comprehensive (loss) income, net of tax		(15,489	)		10,188		(15,630	)		9,341			(11,979	)		(1,984	)		30,819			(141	)

Comprehensive (loss) income	$	(4,228	)	$	13,493	$	62,210		$	40,818
Comprehensive income												$	12,501		$	20,856		$	128,063		$	66,438


	(Unaudited)			(Note 1)		(Unaudited)			(Unaudited)		(Note 1)			(Unaudited)
	November 28, 2014			February 28, 2014		November 29, 2013			August 28, 2015		February 28, 2015			August 29, 2014
ASSETS
Current assets
Cash and cash equivalents	$	31,431		$	63,963	$	15,775		$	33,501	$	43,327		$	45,107
Trade accounts receivable, net		173,691			97,925		201,392			104,690		102,339			93,460
Inventories		286,190			254,761		291,372			297,338		248,577			312,300
Deferred and refundable income taxes		46,247			46,996		47,252			45,082		45,976			45,170
Assets held for sale										—		35,529			—
Prepaid expenses and other		144,086			146,164		151,277			131,635		157,669			141,800

Total current assets		681,645			609,809		707,068			612,246		633,417			637,837
Other assets		501,392			542,766		421,326			539,033		431,838			517,783
Deferred and refundable income taxes		91,905			74,103		98,646			60,897		90,143			82,526
Property, plant and equipment – at cost		810,526			855,141		848,233			878,035		828,028			798,634
Less accumulated depreciation		443,761			479,376		468,015			467,304		447,731			437,435

Property, plant and equipment – net		366,765			375,765		380,218			410,731		380,297			361,199

	$	1,641,707		$	1,602,443	$	1,607,258		$	1,622,907	$	1,535,695		$	1,599,345

LIABILITIES AND SHAREHOLDER’S EQUITY
Current liabilities
Debt due within one year	$	23,800		$	20,000	$	20,000		$	—	$	—		$	20,000
Accounts payable		122,637			120,568		124,163			116,450		133,135			124,282
Accrued liabilities		60,125			68,838		64,792			69,196		75,992			58,947
Accrued compensation and benefits		63,596			74,017		63,910			63,301		95,193			52,761
Income taxes payable		21,835			14,866		2,745			14,398		22,512			16,063
Liabilities held for sale										—		1,712			—
Deferred revenue		22,961			31,288		25,438			23,044		27,200			25,649
Other current liabilities		67,450			85,785		68,408			67,850		63,199			83,910

Total current liabilities		382,404			415,362		369,456			354,239		418,943			381,612
Long-term debt		570,232			539,114		622,328			461,752		472,729			525,590
Other liabilities		311,265			301,815		231,585			359,427		303,231			309,652
Deferred income taxes and noncurrent income taxes payable		12,303			18,705		19,921			10,824		11,466			12,760
Shareholder’s equity
Common shares – par value $.01 per share:
100 shares issued and outstanding		—			—		—
Common shares – par value $.01 per share: 100 shares issued and outstanding										—		—			—
Capital in excess of par value		240,000			240,000		240,000			240,000		240,000			240,000
Accumulated other comprehensive (loss) income		(14,878	)		752		(7,792	)
Accumulated other comprehensive income (loss)										6,416		(24,403	)		611
Retained earnings		140,381			86,695		131,760			190,249		113,729			129,120

Total shareholder’s equity		365,503			327,447		363,968			436,665		329,326			369,731

	$	1,641,707		$	1,602,443	$	1,607,258		$	1,622,907	$	1,535,695		$	1,599,345


	(Unaudited)
	Nine Months Ended						(Unaudited) Six Months Ended
	November 28, 2014			November 29, 2013			August 28, 2015			August 29, 2014
OPERATING ACTIVITIES:
Net income	$	77,840		$	31,477		$	97,244		$	66,579
Adjustments to reconcile net income to cash flows from operating activities:
Stock-based compensation		—			8,091
Gain on sale of Strawberry Shortcake								(61,625	)		—
Net gain on sale of AGI In-Store		(38,663	)		—			—			(38,803	)
Net loss on disposal of fixed assets		15,823			559			66			15,733
Depreciation and intangible assets amortization		45,581			40,450			28,114			30,499
Clinton Cards secured debt recovery		(3,390	)		(4,232	)		—			(3,390	)
Interest on Clinton Cards secured debt		(2,507	)		—
Provision for doubtful accounts		767			513			367			351
Deferred income taxes		(15,716	)		10,988			8,076			(9,795	)
Gain related to Party City investment		—			(3,262	)
Other non-cash charges		5,039			2,090			3,614			2,125
Changes in operating assets and liabilities, net of acquisitions and dispositions:
Trade accounts receivable		(83,981	)		(94,636	)		(3,431	)		119
Inventories		(57,791	)		(43,588	)		(49,866	)		(76,582	)
Other current assets		(185	)		14,817			(7,193	)		(2,354	)
Receivable from parent and related parties		95			—
Net payable/receivable with related parties								(1,698	)		(438	)
Income taxes		886			6,465			(7,554	)		2,322
Deferred costs – net		(1,376	)		15,021			19,377			22,005
Accounts payable and other liabilities		(23,688	)		(21,935	)		(91,698	)		(39,363	)
Other – net		4,216			4,052			680			2,715

Total Cash Flows From Operating Activities		(77,050	)		(33,130	)		(65,527	)		(28,277	)
INVESTING ACTIVITIES:
Property, plant and equipment additions		(70,263	)		(45,336	)		(31,735	)		(50,242	)
Cash paid for acquired character property rights								(2,800	)		—
Proceeds from sale of fixed assets		23,811			1,630			55			23,741
Proceeds from sale of AGI In-Store		73,659			—
(Adjustment to proceeds)/proceeds from sale of AGI In-Store								(3,200	)		73,659
Proceeds from sale of Strawberry Shortcake								105,000			—
Proceeds from surrender of corporate-owned life insurance policies								24,068			—
Proceeds from Clinton Cards administration		11,926			4,982			—			604
Proceeds related to Party City investment		—			12,105

Total Cash Flows From Investing Activities		39,133			(26,619	)		91,388			47,762
FINANCING ACTIVITIES:
Proceeds from revolving lines of credit		347,200			311,336
Repayments on revolving lines of credit		(299,900	)		(295,236	)
Proceeds from term loan		—			339,250
Proceeds from revolving line of credit								191,200			261,000
Repayments on revolving line of credit								(139,500	)		(265,500	)
Repayments on term loan		(15,000	)		—			(65,000	)		(10,000	)
Issuance, exercise or settlement of share-based payment awards		—			(4,487	)
Tax benefit from share-based payment awards		—			279
Contribution from parent		—			240,000
Payments to shareholders to effect merger		—			(568,303	)
Dividends to shareholders		(24,154	)		(27,809	)
Financing fees		(1,065	)		(6,545	)
Dividends to shareholder								(20,724	)		(24,154	)

Total Cash Flows From Financing Activities		7,081			(11,515	)		(34,024	)		(38,654	)
EFFECT OF EXCHANGE RATE CHANGES ON CASH		(1,696	)		980			(1,663	)		313

DECREASE IN CASH AND CASH EQUIVALENTS		(32,532	)		(70,284	)		(9,826	)		(18,856	)
Cash and Cash Equivalents at Beginning of Year		63,963			86,059			43,327			63,963

Cash and Cash Equivalents at End of Period	$	31,431		$	15,775		$	33,501		$	45,107

Three and ~~Nine~~Six Months Ended ~~November~~August 28, ~~2014~~2015 and ~~November~~August 29, ~~2013~~2014

The accompanying unaudited consolidated financial statements of American Greetings Corporation and its subsidiaries (the “Corporation”) have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary to fairly present financial position, results of operations and cash flows for the periods have been included. On August 9, 2013, the Corporation completed a merger whereby the Corporation was acquired by Century Intermediate Holding Company, a company that was formed by the Chairman of the Board, the Co-Chief Executive Officers of the Corporation and certain other members of the Weiss family and related entities (the “Merger”). As a result of the Merger, the Corporation’s equity is no longer publicly traded. As such, earnings per share information is not required.

The Corporation’s fiscal year ends on February 28 or 29. References to a particular year refer to the fiscal year ending in February of that year. For example, ~~2014~~2015 refers to the year ended February 28, ~~2014.~~2015. The Corporation’s subsidiary, AG Retail Cards Limited is consolidated on a one-month lag corresponding with its fiscal year-end of January 3130 for ~~2015.~~2016.

These interim financial statements should be read in conjunction with the Corporation’s financial statements and notes thereto included in its Annual Report on Form 10-K for the year ended February 28, ~~2014,~~2015, from which the Consolidated Statement of Financial Position at February 28, ~~2014,~~2015, presented herein, has been derived.

The Corporation’s investments in less than majority-owned companies in which it has the ability to exercise significant influence over the ~~operation~~operating and financial policies are accounted for using the equity method except when they qualify as variable interest entities (“VIE”) and the Corporation is the primary beneficiary, in which case, the investments are consolidated in accordance with Accounting Standards Codification (“ASC”) Topic 810 (“ASC 810”), “Consolidation.” Investments that do not meet the above criteria but have a readily determinable fair value are measured at fair value with unrealized gains and losses reported in other comprehensive income. Such investments that do not have a readily determinable fair value are accounted for under the cost method.

~~Prior~~The Corporation provides limited credit support to ~~the fourth quarter of 2014, the Corporation held an approximate 15% equity interest in~~ Schurman Fine Papers (“Schurman”) which is a VIE as defined in ASC 810. Schurman owns and operates specialty card and gift retail stores in the United States and Canada. The stores are primarily located in malls and strip shopping centers. During the third quarter of 2014, the Corporation determined that, due to continued operating losses, shareholders’ deficit and lack of return on the Corporation’s investment, the cost method investment was permanently impaired. As a result, the Corporation recorded an impairment charge in the amount of $1.9 million which reduced the carrying amount of the investment to zero. In addition, during the fourth quarter of 2014, in order to mitigate ongoing risks to the Corporation that may arise from retaining an equity interest in Schurman, the Corporation transferred to Schurman its 15% equity interest and, as a result, no longer has an equity interest in Schurman.

~~The Corporation provides Schurman~~This limited credit support is provided through the provision of a liquidity guaranty (“Liquidity Guaranty”) in favor of the lenders under Schurman’s senior revolving credit facility (the “Senior Credit Facility”). Pursuant to the terms of the Liquidity Guaranty, the Corporation has guaranteed the repayment of up to $10.0 million of Schurman’s borrowings under the Senior Credit Facility to help ensure that Schurman has sufficient borrowing availability under this facility. The Liquidity Guaranty is required to be backed by a letter of credit for the term of the Liquidity Guaranty, which expires in ~~July 2016.~~January 2019. The Corporation’s obligations under the Liquidity Guaranty generally may not be triggered unless Schurman’s lenders under its Senior Credit Facility have substantially completed the liquidation of the collateral under Schurman’s Senior Credit Facility, or 91 days after the liquidation is started, whichever is earlier, and will be limited to the deficiency, if any, between the amount owed and the amount collected in connection with the liquidation. There was no triggering event or liquidation of collateral as of ~~November~~August 28, ~~2014~~2015 requiring the use of the Liquidity Guaranty.

During the current ~~quarter,~~period, the Corporation assessed the variable interests in Schurman and determined that a third party holder of variable interests has the controlling financial interest in the VIE and thus, the third party, not the Corporation, is the primary beneficiary. In completing this assessment, the Corporation identified the activities that it considers most significant to the future economic success of the VIE and determined that it does not have the power to direct those activities. As such, Schurman is not consolidated in the Corporation’s results. The Corporation’s maximum exposure to loss as it relates to Schurman as of ~~November~~August 28, ~~2014~~2015 includes:

During the prior year first quarter, ~~of 2015,~~ the Corporation identified and corrected errors in the accounting for income taxes that related to the year ended February 28, 2014. These errors primarily related to the Corporation’s failure to consider all sources of available taxable income when assessing the need for a valuation allowance against certain deferred tax assets and the recognition of a liability for an uncertain tax position. These errors were the result of the significant complexity created as a result of the ~~Merger and related transactions.~~going private transaction. The impact of correcting these items had a non-cash effect, decreasing tax expense and increasing net income by $4.1 million. Based on its evaluation as discussed more fully below, the Corporation concluded that the corrections to the financial statements were immaterial to its financial results for the ~~year~~years ended February 28, 2014 and ~~its expected financial results for the year ending February 28,~~ 2015.

In accordance with ASC Topic 250, Accounting Changes and Error Corrections, the Corporation evaluated the effects of the errors on its financial statements for the ~~year~~years ended February 28, 2014 and ~~the expected full year financial results for the year ending February 28,~~ 2015 and concluded that the results of operations for these periods ~~are~~were not materially misstated. In reaching its conclusion, the Corporation considered numerous qualitative and quantitative factors, including but not limited to the following:

Based on its evaluation, the Corporation concluded that it is not probable that the judgment of a reasonable person relying on the financial statements would have been changed or influenced by the error or correction of the error.

A significant portion of the Corporation’s business is seasonal in nature. Therefore, the results of operations for interim periods are not necessarily indicative of the results for the fiscal year taken as a whole.

In ~~August 2014,~~July 2015, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2015-11 (“ASU 2015-11”), “Simplifying the Measurement of Inventory”. ASU 2015-11 requires an entity to measure inventory that is within the scope of this ASU at the lower of cost and net realizable value. Existing impairment models will continue to be used for inventories that are accounted for using the last-in first-out (“LIFO”) method. ASU 2015-11 requires prospective adoption for inventory measurements for fiscal years beginning after December 15, 2016 and interim periods within those fiscal years for public business entities. Early adoption is permitted. At August 28, 2015, approximately 48% of the Corporation’s pre-LIFO consolidated inventory is measured using a method other than LIFO. The Corporation does not expect that the adoption of this standards update will have a material impact on its consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-03 (“ASU 2015-03”), “Simplifying the Presentation of Debt Issuance Costs”. ASU 2015-03 requires that all costs incurred to issue debt be presented in the balance sheet as a direct deduction from the carrying value of the debt, similar to the presentation of debt discounts. ASU 2015-03 is effective for public business entities for fiscal years beginning after December 15, 2015 and interim periods within those fiscal years, with early adoption permitted. The Corporation does not expect that the adoption of this standards update will have a material impact on its consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-15, (“ASU 2014-15”), “Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern”. ASU 2014-15 requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued and provides guidance on determining when and how to disclose going concern uncertainties in the financial statements. Certain disclosures will be required if conditions give rise to substantial doubt about an entity’s ability to continue as a going concern. ASU 2014-15 applies to all entities and is effective for annual and interim reporting periods ending after December 15, 2016, with early adoption permitted. The Corporation does not expect that the adoption of this ~~standard~~standards update will ~~have a material effect on~~impact its consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, (“ASU 2014-09”), “Revenue from Contracts with Customers”. The objective ofASU ~~2014-19~~2014-09 is to establish a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most of the existing revenue recognition guidance, including industry-specific guidance. The core principle of ASU 2014-09 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ~~The~~In applying the new guidance, isan entity will (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the contract’s performance obligations; and (5) recognize revenue when (or as) the entity satisfies a performance obligation. ASU 2014-09 applies to all contracts with customers except those that are within the scope of other topics in the FASB Accounting Standards Codification. In August 2015, the FASB issued ASU 2015-14, (“ASU 2015-14”), “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date”. The amendments in ASU 2015-14 defer the effective date of ASU 2014-09 for all entities by one year. Accordingly, public business entities should apply the guidance in ASU 2014-09 to annual reporting periods (including interim periods within those periods) beginning after December 15, ~~2016 for public companies.~~2017. Early adoption is permitted but not ~~permitted. The standard permits~~before annual periods beginning after December 15, 2016. Entities have the ~~use~~option of using either a full retrospective or modified ~~retrospective (cumulative effect) transition method.~~approach to adopt ASU 2014-09. The Corporation is currently evaluating the new guidance and has not determined the impact this standard may have on its financial statements nor decided upon the method of adoption.

~~In April 2014, the FASB issued ASU No. 2014-08 (“ASU 2014-08”), “Reporting Discontinued Operations~~Note 4 – Acquisitions and ~~Disclosures~~Dispositions

Sale of Disposals of Components of an Entity.” ASU 2014-08 changes the criteria for determining which disposals can be presented as discontinued operations and modifies the related disclosure requirements. Under the new guidance, a disposal of a component of an entity or a group of components of an entity is required to beStrawberry Shortcake

As reported in ~~discontinued operations if~~its Annual Report on Form 10-K for the ~~disposal represents a strategic shift that has (or will have) a major effect~~year ended February 28, 2015, the Corporation entered into an agreement to sell its Strawberry Shortcake property and related intangible assets and licensing agreements (“Strawberry Shortcake”) on ~~an entity’s operations~~February 2, 2015. At February 28, 2015, the assets and ~~financial results and is disposed of or~~liabilities related to the pending sale were classified as held for sale. ~~The standard also introduces several new disclosures. The guidance applies prospectively~~In March 2015, the sale was completed and the Corporation received $105.0 million in cash which is included in “Proceeds from sale of Strawberry Shortcake” within “Investing Activities” on the Consolidated Statement of Cash Flows. During the six months ended August 28, 2015, the Corporation recognized a net gain of $61.6 million from the sale of Strawberry Shortcake.

As reported in its Annual Report on Form 10-K for the year ended February 28, 2015, in order to ~~new disposals~~secure complete control and ~~new classifications~~ownership over the rights in certain character properties, including the Strawberry Shortcake property, that the Corporation previously granted to a third party (the “Character Property Rights”), on December 18, 2014, the Corporation paid $37.7 million to purchase these rights, and recorded the rights as indefinite-lived intangible assets. At February 28, 2015, approximately $26 million of ~~disposal groups~~this amount was classified as held for sale ~~after~~related to the ~~effective date. ASU 2014-08~~

expected sale of Strawberry Shortcake. In addition, under the agreement by which it acquired these rights, the Corporation agreed that in the event of a future sale of these Character Property Rights and the associated character properties, the Corporation will, depending on the proceeds of such sale, pay up to an additional $4.0 million of the proceeds that it receives from any such sale. Accordingly, as a result of the sale of the Strawberry Shortcake property described above, in March 2015, the Corporation made an additional payment in the amount of $2.8 million. This payment is ~~effective~~included in “Cash paid for ~~annual and interim periods beginning after December 15, 2014, with early adoption permitted. The Corporation adopted ASU 2014-08~~acquired character property rights” within “Investing Activities” on the Consolidated Statement of Cash Flows.

On August 29, 2014, the Corporation completed the sale of its wholly-owned display fixtures business, AGI In-Store, for $73.7 million in ~~connection with~~cash, subject to closing date working capital adjustments. A gain of $38.8 million was recognized from the ~~disposition of A.G. Industries, Inc. See Note 4 for further information.~~

In July 2013, the FASB issued ASU No. 2013-11 (“ASU 2013-11”), “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.” ASU 2013-11 requires an unrecognized tax benefit, or a portion of an unrecognized tax benefit, to be presentedsale in the ~~financial statements as~~prior year second fiscal quarter and was included in “Other operating income – net” on the Consolidated Statement of Income. In March 2015, the working capital adjustments were finalized and a ~~reduction~~payment of $3.2 million was made to ~~a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To~~ the ~~extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at~~buyer. This payment and the ~~reporting~~prior year cash proceeds from the sale are included in “(Adjustment to proceeds)/proceeds from sale of AGI In-Store” within “Investing Activities” on the Consolidated Statement of Cash Flows. Subsequent to the prior year second quarter, post-closing date adjustments, including the ~~unrecognized tax benefit should be presented~~final working capital adjustment, reduced the overall gain by $0.1 million and $3.7 million in the ~~financial statements as a liability~~prior year third and not combined with deferred tax assets. ASU 2013-11 is effective for annual and interim periods beginning after December 15, 2013 for public companies, with early adoption permitted. The Corporation adopted ASU 2013-11 on March 1, 2014.

On July 1, 2014, the Corporation sold its current world headquarters location and entered into an operating lease arrangement with the new owner of the building. The Corporation expects to remain in this current location until the completion of the new world headquarters, which the Corporation anticipates will occur in calendar year 2016. Net of transaction costs, the Corporation received $13.5 million in cash from the sale, and recorded a non-cash loss on disposal of $15.5 million in the ~~Corporation’s~~prior year second fiscal quarter, which loss is included in “Other operating income – net” on the Consolidated Statement of Income.

~~On August 29, 2014, the Corporation completed the~~ The cash proceeds are included in “Proceeds from sale of its wholly-owned display fixtures business, A.G. Industries, Inc. (dba AGI In-Store “AGI In-Store”), to Rock-Tenn Company for $73.7 million in cash, subject to closing date working capital adjustments. A net gain of $38.7 million has been recognized from the sale during the nine month period ended November 28, 2014 and is included in “Other operating income – net”fixed assets” on the Consolidated Statement of ~~Income. AGI In-Store, which is~~Cash Flows.

As reported in its Annual Report on Form 10-K for the year ended February 28, 2015, the Corporation, in order to mitigate the ongoing risks to the Corporation that may arise from retaining certain corporate-owned life insurance policies, surrendered those policies during the prior year fourth quarter. In March 2015, in connection with the surrender of those policies, the Corporation received proceeds of $24.1 million. These proceeds are included in “Proceeds from surrender of corporate-owned life insurance policies” within “Investing Activities” on the ~~non-reportable segment, had operating income~~Consolidated Statement of ~~$0.1 million for the current fiscal year through the date of sale ($18.6 million of operating income for the nine month period ended November 29, 2013).~~Cash Flows.

The Corporation has agreements for licensing ~~the Care Bears and Strawberry Shortcake~~certain characters and other intellectual property. These license agreements provide for royalty revenue to the Corporation, which is recorded in “Other revenue” on the Consolidated Statement of Income. These license agreements may include the receipt of upfront advances, which are recorded as deferred revenue and earned during the period of the agreement. Revenues and expenses associated with the servicing of these agreements, primarily relating to the licensing activities included in the ~~non-reportable~~Non-reportable segment, are summarized as follows:


	Three Months Ended					Nine Months Ended				Three Months Ended				Six Months Ended
(In thousands)	November 28, 2014			November 29, 2013		November 28, 2014		November 29, 2013		August 28, 2015		August 29, 2014		August 28, 2015		August 29, 2014
Royalty revenue	$	5,666		$	5,046	$	16,527	$	17,964	$	1,975	$	4,923	$	3,104	$	10,861
Royalty expenses
Material, labor and other production (credit) costs	$	(1,527	)	$	1,954	$	1,508	$	5,453

Royalty expenses:
Material, labor and other production costs										$	1,241	$	1,491	$	2,175	$	3,035
Selling, distribution and marketing expenses		1,562			1,431		4,837		4,615		988		1,699		1,691		3,275
Administrative and general expenses		447			421		1,228		1,322		344		309		711		781

	$	482		$	3,806	$	7,573	$	11,390	$	2,573	$	3,499	$	4,577	$	7,091

As disclosed in Note 4, the Corporation completed the sale of Strawberry Shortcake in March 2015. As such, royalty revenue and expenses related to Strawberry Shortcake for the prior year three and six month periods do not have comparative amounts in the current year.


	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
(In thousands)	November 28, 2014			November 29, 2013			November 28, 2014			November 29, 2013			August 28, 2015			August 29, 2014			August 28, 2015			August 29, 2014
Gain adjustment (gain) on sale of AGI In-Store	$	139		$	—		$	(38,663	)	$	—
Gain adjustment (gain) on sale of Strawberry Shortcake													$	41		$	—		$	(61,625	)	$	—
Gain on sale of AGI In-Store														—			(38,803	)		—			(38,803	)
Clinton Cards secured debt recovery		—			(1,804	)		(3,390	)		(4,232	)		—			—			—			(3,390	)
State tax credits														(6,541	)		—			(6,541	)		—
Loss on asset disposal		90			672			15,823			559			57			15,710			66			15,733
Miscellaneous		(928	)		(1,236	)		(265	)		(2,974	)		(866	)		(735	)		(1,629	)		664

Other operating income – net	$	(699	)	$	(2,368	)	$	(26,495	)	$	(6,647	)	$	(7,309	)	$	(23,828	)	$	(69,729	)	$	(25,796	)

During the ~~nine~~six months ended ~~November~~August 28, ~~2014,~~2015, the Corporation recognized a net gain of ~~$38.7~~$61.6 million from the sale of ~~AGI In-Store,~~Strawberry Shortcake, which included a ~~second~~first quarter gain of ~~$38.8~~$61.7 million and an adjustment to the gain in the ~~third~~second quarter of approximately $0.1 million. ~~The cash proceeds of $73.7 million from the sale are included in “Proceeds from sale of AGI In-Store” on the Consolidated Statement of Cash Flows.~~ See Note 4 for further information.

During the quarter ended August 28, 2015, the Corporation recognized income of $6.5 million from tax credits received from the State of Ohio under certain incentive programs made available to the Corporation in connection with its decision to maintain its world headquarters in the state of Ohio.

During the quarter ended August 29, 2014, the Corporation recognized a gain on the sale of AGI In-Store of $38.8 million. See Note 4 for further information.

“Loss on asset disposal” during the ~~nine~~three and six month ~~period~~periods ended ~~November 28,~~August 29, 2014 included a non-cash loss of $15.5 million related to the sale of the Corporation’s current world headquarters ~~location during the current year second quarter. The cash proceeds of $13.5 million are included in “Proceeds from sale of fixed assets” on the Consolidated Statement of Cash Flows.~~location. See Note 4 for further information.

During the prior year first quarter, ~~of 2015,~~ the Corporation recorded an impairment recovery of $3.4 million related to the senior secured debt of Clinton Cards that the Corporation acquired in May 2012 and subsequently impaired. This recovery, which was based on current estimated recovery information provided by the bankruptcy administrators of the Clinton Cards liquidation (“Administrators”), represented the final amount of a full recovery of the prior impairment. During the third quarter of 2015, as part of the liquidation process, the Corporation received a distribution of $11.3 million which included the full recovery of the remaining senior secured debt claim as well as accumulated interest that was previously not expected to be received. The interest of $2.5 million is included in “Interest income” on the Consolidated Statement of Income.

During the three and nine month periods ended November 29, 2013 the impairment of the secured debt of Clinton Cards, based on updated recovery information provided by the Administrators, was also adjusted, resulting in a gain of $1.8 million and $4.2 million, respectively.

~~During the three months ended November 29, 2013, the Corporation recognized an impairment loss of $1.9 million associated with its investment in Schurman. See Note 1 for further information.~~

~~In July 2013, the Corporation recognized a gain totaling $3.3 million related to a cash distribution on its minority investment in the common stock of Party City Holdings, Inc. (“Party City”).~~


(In thousands)	Foreign Currency Translation Adjustments			Pensions and Other Postretirement Benefits			Unrealized Investment Gain		Total
Balance at February 28, 2015	$	1,836		$	(26,239	)	$	—	$	(24,403	)
Other comprehensive income (loss) before reclassifications		(4,379	)		245			34,477		30,343
Amounts reclassified from accumulated other comprehensive income (loss)		—			476			—		476

Net current period other comprehensive income (loss)		(4,379	)		721			34,477		30,819

Balance at August 28, 2015	$	(2,543	)	$	(25,518	)	$	34,477	$	6,416

The reclassifications out of accumulated other comprehensive income (loss) are as ~~follows.~~follows:


(In thousands)	Nine Months Ended November 28, 2014			Consolidated Statement of Income Classification	Six Months Ended August 28, 2015			Consolidated Statement of Income Classification
Amortization of pension and other postretirement benefits items
Pensions and Postretirement Benefits:
Amortization of pensions and other postretirement benefits items
Actuarial losses, net	$	(1,060	)	Administrative and general expenses	$	(1,094	)	Administrative and general expenses
Prior service credit, net		394		Administrative and general expenses		348		Administrative and general expenses

		(666	)			(746	)
Tax benefit		221		Income tax expense		270		Income tax expense

Total, net of tax		(445	)			(476	)

Total reclassifications	$	(445	)		$	(476	)

As reported in its Annual Report on Form 10-K for the year ended February 28, 2015, the Corporation held a minority investment in the common stock of a privately held company which was classified as available for sale and accounted for under the cost method due to the Corporation’s inability to exercise significant influence over the investee’s operating and financial policies and the absence of a readily determinable fair value for its investment. At February 28, 2015, the carrying value of this investment was zero as a result of a cash distribution in 2014 that included a return of capital. During the current year first quarter, the investee successfully completed an initial public offering of its common stock and thereby established a readily determinable fair value for the Corporation’s previously nonmarketable investment. In accordance with ASC Topic 320, “Investments – Debt and Equity

Securities,” the investment is now reported at fair value and is included in “Other assets” on the Corporation’s Consolidated Statement of Financial Position. See Note 14 for further information. As a result of the initial fair value measurement at May 29, 2015 and subsequent revaluation at the end of the second quarter, an unrealized gain, net of tax, of $34.5 million was recognized in other comprehensive income during the six months ended August 28, 2015.

Trade accounts receivable is reported net of certain allowances and discounts. The most significant of these are as follows:


(In thousands)	November 28, 2014		February 28, 2014		November 29, 2013		August 28, 2015		February 28, 2015		August 29, 2014
Allowance for seasonal sales returns	$	26,651	$	26,613	$	30,028	$	16,437	$	18,895	$	18,147
Allowance for outdated products		9,624		9,692		9,848		10,109		11,074		10,863
Allowance for doubtful accounts		1,752		2,488		3,934		1,814		1,730		1,612
Allowance for marketing funds		33,155		28,277		28,416		23,495		26,841		28,836
Allowance for rebates		31,987		27,369		29,191		21,465		34,214		27,425

	$	103,169	$	94,439	$	101,417	$	73,320	$	92,754	$	86,883

Certain customer allowances and discounts are settled in cash. These accounts, primarily rebates, which are classified as “Accrued liabilities” on the Consolidated Statement of Financial Position, totaled ~~$16.1~~$13.9 million, ~~$16.5~~$17.0 million and ~~$15.4~~$12.5 million as of ~~November~~August 28, ~~2014,~~2015, February 28, ~~2014~~2015 and ~~November~~August 29, ~~2013,~~2014, respectively.


(In thousands)	November 28, 2014		February 28, 2014		November 29, 2013		August 28, 2015		February 28, 2015		August 29, 2014
Raw materials	$	11,668	$	20,915	$	22,447	$	19,861	$	14,809	$	15,304
Work in process		6,404		8,093		8,178		12,869		7,578		11,892
Finished products		343,460		287,481		323,204		337,344		297,899		359,219

		361,532		316,489		353,829		370,074		320,286		386,415
Less LIFO reserve		84,132		82,140		85,617		81,659		80,755		83,493

		277,400		234,349		268,212		288,415		239,531		302,922
Display materials and factory supplies		8,790		20,412		23,160		8,923		9,046		9,378

	$	286,190	$	254,761	$	291,372	$	297,338	$	248,577	$	312,300

The valuation of inventory under the Last-In, First-Out (“LIFO”) method is made at the end of each fiscal year based on inventory levels and costs at that time. Accordingly, interim LIFO calculations, by necessity, are based on estimates of expected fiscal year-end inventory levels and costs, and are subject to final fiscal year-end LIFO inventory calculations.

Inventory held on location for retailers with scan-based trading arrangements, which is included in finished products, totaled ~~$88.5~~$64.2 million, ~~$66.8~~$63.3 million and ~~$82.0~~$68.0 million as of ~~November~~August 28, ~~2014,~~2015, February 28, 2015 and August 29, 2014, ~~and November 29, 2013,~~ respectively.

Deferred costs and future payment commitments for retail supply agreements are included in the following financial statement captions:


(In thousands)	November 28, 2014			February 28, 2014			November 29, 2013			August 28, 2015			February 28, 2015			August 29, 2014
Prepaid expenses and other	$	107,729		$	100,282		$	103,173		$	89,305		$	98,061		$	90,496
Other assets		389,533			428,090			301,844			411,909			364,311			403,920

Deferred cost assets		497,262			528,372			405,017			501,214			462,372			494,416
Other current liabilities		(66,007	)		(84,860	)		(64,652	)		(64,117	)		(59,018	)		(82,422	)
Other liabilities		(136,111	)		(149,190	)		(83,100	)		(160,558	)		(104,127	)		(141,102	)

Deferred cost liabilities		(202,118	)		(234,050	)		(147,752	)		(224,675	)		(163,145	)		(223,524	)

Net deferred costs	$	295,144		$	294,322		$	257,265		$	276,539		$	299,227		$	270,892

The Corporation maintains an allowance for deferred costs related to supply agreements of ~~$2.6~~$3.5 million, ~~$4.1~~$2.3 million and ~~$5.6~~$3.1 million at ~~November~~August 28, ~~2014,~~2015, February 28, ~~2014~~2015 and ~~November~~August 29, ~~2013,~~2014, respectively. This allowance is included in “Other assets” on the Consolidated Statement of Financial Position.

Included in “Other liabilities” on the Consolidated Statement of Financial Position is a deferred lease obligation related to an operating lease with H L & L Property Company (“H L & L”), for a building that will function as the ~~future American Greetings~~Corporation’s world headquarters. The building is currently being constructed and expected to be available for occupancy in calendar year 2016.

H L & L is an indirect affiliate of ~~American Greetings~~the Corporation as it is indirectly owned by members of the Weiss ~~family.~~Family (as defined in Note 17). Due to, among other things, the Corporation’s involvement in the construction of the building, the Corporation is required to be treated, for accounting purposes only, as the “deemed owner” of the new world headquarters building during the construction period. Accordingly, the Corporation has recorded an asset and associated offsetting liability during the construction of the building, even though the Corporation does not own the asset and is not the obligor on the corresponding construction debt. ~~As of November 28, 2014, the~~The asset and corresponding liability was ~~$19.0 million.~~$57.4 million, $31.7 million and $14.8 million as of August 28, 2015, February 28, 2015 and August 29, 2014, respectively. See Note 17 for further information.

There was no debt due within one year as of August 28, 2015 and February 28, 2015. Debt due within one year ~~was~~totaled $20,000 as ~~follows:~~of August 29, 2014, which represented the current maturity of the term loan.

Long-term debt and their related calendar year due dates as of August 28, 2015, February 28, 2015 and August 29, 2014, respectively, were as follows:


(In thousands)	August 28, 2015			February 28, 2015			August 29, 2014
Term loan, due 2019	$	185,000		$	250,000		$	330,000
7.375% senior notes, due 2021		225,000			225,000			225,000
Revolving credit facility, due 2018		56,000			4,300			—
6.10% senior notes, due 2028		181			181			181
Unamortized financing fees		(4,429	)		(6,752	)		(9,591	)

		461,752			472,729			545,590
Current portion of term loan		—			—			(20,000	)

	$	461,752		$	472,729		$	525,590

At ~~November~~August 28, ~~2014,~~2015, the balances outstanding on the term loan facility ~~the~~and revolving credit ~~facility and accounts receivable~~ facility bear interest at a rate of approximately 2.7%, and 2.7% ~~and 0.6%~~, respectively. The revolving credit facility ~~and accounts receivable facility provide~~provides the Corporation with funding of up to $250 ~~million and~~million. The Corporation is also a party to an accounts receivable facility that provides funding of up to $50 million, under which there were no borrowings outstanding as of August 28, 2015, February 28, 2015 and August 29, 2014, respectively. Outstanding letters of credit, which reduce the total credit available under the revolving credit and the accounts receivable facilities, totaled ~~$27.7~~$26.4 million at ~~November~~August 28, ~~2014.~~2015.

In March 2015 the Corporation made a voluntary prepayment of $65.0 million on the term loan facility, thereby eliminating all future quarterly installment payments prior to this facility’s August 9, 2019 maturity date. During the six months ended August 28, 2015, the Corporation expensed an additional $1.8 million of unamortized financing fees as a result of the prepayment.

The total fair value of the Corporation’s publicly traded debt, which was considered a Level 1 valuation as it was based on quoted market prices, was ~~$238.0~~$234.1 million (at a carrying value of $225.2 million), ~~$234.7~~$238.2 million (at a carrying value of $225.2 million) and ~~$228.8~~$240.3 million (at a carrying value of $225.2 million) at ~~November~~August 28, ~~2014,~~2015, February 28, ~~2014~~2015 and ~~November~~August 29, ~~2013,~~2014, respectively.

The total fair value of the Corporation’s non-publicly traded debt, which was considered a Level 2 valuation as it was based on comparable privately traded debt prices, was ~~$369.6~~$240.5 million (at a principal carrying value of ~~$373.0~~$241.0 million), ~~$344.5~~$251.8 million (at a principal carrying value of ~~$344.5~~$254.3 million), and ~~$427.3~~$330.0 million (at a principal carrying value of ~~$427.3~~$330.0 million) at ~~November~~August 28, ~~2014,~~2015, February 28, ~~2014~~2015 and ~~November~~August 29, ~~2013,~~2014, respectively.

On September 5, 2014, the Corporation amended the Credit Agreement which provides for the term loan facility and revolving credit facility. The amendment modifies the Credit Agreement to, among other things: (i) reduce the interest rates applicable to the term loan and revolving loans, (ii) eliminate the LIBOR floor interest rate used in the determination of interest charged on Eurodollar revolving loans, (iii) reduce the commitment fee applicable to unused revolving commitments and (iv) reset the usage term of the general restricted payment basket with effect from September 5, 2014. As a result of this amendment and certain changes in the syndicated lending group, the Corporation expensed $1.9 million of unamortized financing fees and capitalized $1.1 million of new fees in the quarter ended NovemberAt August 28, ~~2014.~~

On August 8, 2014, the Corporation amended its accounts receivable facility. The amendment modified the accounts receivable facility to, among other things: (i) extend the scheduled termination date to August 7, 2015, ~~and (ii) reduce the fees associated with this facility.~~

~~At November 28, 2014,~~ the Corporation was in compliance with the financial covenants under its borrowing agreements.

The components of periodic benefit cost for the Corporation’s defined benefit pension and postretirement benefits plans are as follows:


	Defined Benefit Pension Plans
	Three Months Ended						Nine Months Ended						Defined Benefit Pension Plans
	November 28,			November 29,			November 28,			November 29,			Three Months Ended						Six Months Ended
(In thousands)	2014			2013			2014			2013			August 28, 2015			August 29, 2014			August 28, 2015			August 29, 2014
Service cost	$	144		$	315		$	433		$	955		$	159		$	145		$	318		$	289
Interest cost		1,833			1,766			5,516			5,244			1,550			1,846			3,108			3,683
Expected return on plan assets		(1,617	)		(1,577	)		(4,868	)		(4,718	)		(1,659	)		(1,628	)		(3,327	)		(3,251	)
Amortization of prior service cost		582			68			584			170			1			1			2			2
Amortization of actuarial loss		710			871			2,136			2,701			846			720			1,694			1,426

	$	1,652		$	1,443		$	3,801		$	4,352		$	897		$	1,084		$	1,795		$	2,149


	Postretirement Benefits
	Three Months Ended						Nine Months Ended						Postretirement Benefits Plan
	November 28,			November 29,			November 28,			November 29,			Three Months Ended							Six Months Ended
(In thousands)	2014			2013			2014			2013			August 28, 2015			August 29, 2014				August 28, 2015			August 29, 2014
Service cost	$	76		$	48		$	276		$	323		$	125		$	100			$	250		$	200
Interest cost		559			572			1,909			1,797			525			675				1,050			1,350
Expected return on plan assets		(762	)		(775	)		(2,162	)		(2,300	)		(675	)		(700	)			(1,350	)		(1,400	)
Amortization of prior service credit		(328	)		(327	)		(978	)		(977	)		(175	)		(325	)			(350	)		(650	)
Amortization of actuarial gain		(626	)		(357	)		(1,076	)		(782	)		(300	)		(225	)			(600	)		(450	)

	$	(1,081	)	$	(839	)	$	(2,031	)	$	(1,939	)	$	(500	)	$	(475	)		$	(1,000	)	$	(950	)
																			��

The Corporation has a discretionary profit-sharing plan with a 401(k) provision covering most of its United States employees. The profit-sharing plan expense for the ~~nine~~six months ended ~~November~~August 28, ~~2014~~2015 was ~~$7.5~~$3.4 million, compared to ~~$4.9~~$5.5 million in the prior year period. The Corporation also matches a portion of 401(k) employee contributions. The expenses recognized for the three and ~~nine~~six month periods ended ~~November~~August 28, ~~2014~~2015 were ~~$0.9~~$1.3 million and ~~$3.6~~$2.6 million ($1.3 million and ~~$4.0~~$2.6 million for the three and ~~nine~~six month periods ended ~~November~~August 29, ~~2013)~~2014), respectively. The profit-sharing plan and 401(k) matching expenses for the ~~nine~~six month periods are estimates as actual contributions are determined after fiscal year-end.

At ~~November~~August 28, ~~2014,~~2015, February 28, ~~2014~~2015 and ~~November~~August 29, ~~2013,~~2014, the liability for postretirement benefits other than pensions was ~~$20.6~~$19.2 million, ~~$17.9~~$17.5 million and ~~$18.6~~$19.7 million, respectively, and is included in “Other liabilities” on the Consolidated Statement of Financial Position. At ~~November~~August 28, ~~2014,~~2015, February 28, ~~2014~~2015 and ~~November~~August 29, ~~2013,~~2014, the long-term liability for pension benefits was ~~$74.8~~$78.6 million, ~~$77.3~~$81.9 million and ~~$81.0~~$74.5 million, respectively, and is included in “Other liabilities” on the Consolidated Statement of Financial Position.

Assets and liabilities measured at fair value are classified using the fair value hierarchy based upon the transparency of inputs as of the measurement date. The classification of fair value measurements within the hierarchy is based upon the lowest level of input that is significant to the measurement. The three levels are defined as follows:

The following table summarizes the financial assets and liabilities measured at fair value as of ~~November~~August 28, ~~2014:~~2015:


(In thousands)	August 28, 2015		Level 1		Level 2		Level 3
Assets measured on a recurring basis:
Deferred compensation plan assets	$	11,514	$	10,236	$	1,278	$	—
Investment in equity securities		56,482		56,482		—		—

	$	67,996	$	66,718	$	1,278	$	—

Liabilities measured on a recurring basis:
Deferred compensation plan liabilities	$	12,425	$	10,236	$	2,189	$	—

The following table summarizes the assets and liabilities measured at fair value as of February 28, ~~2014:~~2015:


(In thousands)	February 28, 2014		Level 1		Level 2		Level 3		February 28, 2015		Level 1		Level 2		Level 3
Assets measured on a recurring basis:
Deferred compensation plan assets	$	12,285	$	10,289	$	1,996	$	—	$	12,745	$	10,997	$	1,748	$	—

Liabilities measured on a recurring basis:
Deferred compensation plan liabilities	$	13,230	$	10,289	$	2,941	$	—	$	13,412	$	10,997	$	2,415	$	—

The following table summarizes the assets and liabilities measured at fair value as of ~~November~~August 29, ~~2013:~~2014:


(In thousands)	November 29, 2013		Level 1		Level 2		Level 3		August 29, 2014		Level 1		Level 2		Level 3
Assets measured on a recurring basis:
Deferred compensation plan assets	$	12,129	$	8,814	$	3,315	$	—	$	12,516	$	10,599	$	1,917	$	—

Liabilities measured on a recurring basis:
Deferred compensation plan liabilities	$	13,295	$	8,814	$	4,481	$	—	$	13,429	$	10,599	$	2,830	$	—

The deferred compensation plan includes investments in mutual funds and a money market fund. Assets held in mutual funds are recorded at fair value, which is considered a Level 1 valuation as it is based on each fund’s quoted market value per share in an active market. The money market fund is classified as Level 2 as substantially all of the fund’s investments are determined using amortized cost. The fair value of the deferred compensation plan liabilities is based on the fair value of: (i) the plan’s assets for invested deferrals and (ii) hypothetical investments for unfunded deferrals resulting from the conversion of deferred restricted stock units to future cash-settled obligations pursuant to the Merger. Prior to the Merger, the assets and related obligation associated with deferred restricted stock units were carried at costdeferrals.

The investment in equity ~~and offset each other.~~securities is considered a Level 1 valuation as it is based on a quoted price in an active market.

The Corporation is presently involved in various judicial, administrative, regulatory and arbitration proceedings concerning matters arising in the ordinary course of business, including but not limited to, employment, commercial disputes and other contractual ~~matters, one of which is described below.~~matters. These matters are inherently subject to many uncertainties regarding the possibility of a loss to the Corporation. These uncertainties will ultimately be resolved when one or more future events occur or fail to occur, confirming the incurrence of a liability or reduction of a liability. In accordance with ASC Topic 450, “Contingencies,” the Corporation accrues for these contingencies by a charge to income when it is both probable that one or more future events will occur confirming the fact of a loss and the amount of the loss can be reasonably estimated. This accrual is included in “Accrued liabilities” on the Consolidated Statement of Financial Position. Due to this uncertainty, the actual amount of any loss may ultimately prove to be larger or smaller than the amounts reflected in the Corporation’s Consolidated Financial Statements. Some of these proceedings are at preliminary stages and some of these cases seek an indeterminate amount of damages.

Al Smith et al. v. American Greetings Corporation.On June 4, 2014, Al Smith and Jeffrey Hourcade, former fixture installation crew members for special projects, individually and on behalf of those similarly situated, filed a putative class action lawsuit against American Greetings Corporation in the U.S. District Court for the Northern District of California, San Francisco Division. Plaintiffs claim that the Corporation violated certain rules under the Fair Labor Standards Act and California law, including the California Labor Code and Industrial Welfare Commission Wage Orders. For themselves and the proposed classes, plaintiffs seek an unspecified amount of general and special damages, including but not limited to minimum wages, agreed upon wages and overtime wages, statutory liquidated damages, statutory penalties (including penalties under the California Labor Code Private Attorney General Act of 2004 (“PAGA”), unpaid benefits, reasonable attorneys’ fees and costs, and interest). In addition, plaintiffs request disgorgement of all funds the Corporation acquired by means of any act or practice that constitutes unfair competition and restoration of such funds to the plaintiffs and the proposed classes. On November 6, 2014, plaintiffs filed a Second Amended Complaint to add claims for reimbursement of business expenses and failure to provide meal periods in violation of California Law and on December 12, 2014, amended their PAGA notice to include the newly added claims.

~~Although~~On January 20, 2015, the parties reached a settlement in principle that, if approved by the Court, will fully and finally resolve the claims brought by Smith and Hourcade, as well as the classes they seek to represent. The settlement was a product of extensive negotiations and a private mediation, which was finalized and memorialized in a Stipulation and Class Action Settlement Agreement signed March 30, 2015. On March 31, 2015, plaintiffs filed a Motion for Preliminary Approval of Class Action Settlement and on July 23, 2015, the Court entered its Order Granting Preliminary Approval of Class Action Settlement.

The proposed settlement establishes a settlement fund of $4.0 million to pay claims from current and former employees who worked at least one day for American Greetings Corporation and/or certain of its subsidiaries in any hourly non-exempt position in California between June 4, 2010 and July 23, 2015. On August 24, 2015, the claims administrator commenced mailing of notice and claim forms to class members. The Court’s Order Granting Preliminary Approval of Class Action Settlement ordered plaintiffs to file their motion for final approval of the settlement, together with applications for attorney’s fees, costs and service awards, no later than October 16, 2015 and set the final approval hearing for December 17, 2015. If the settlement is finally approved, American Greetings will fund the settlement within twenty (20) days after passage of all appeal periods. Thereafter, the settlement funds will be disbursed as provided in the settlement agreement and the Court’s orders.

Michael Ackerman v. American Greetings Corporation, et al. On March 6, 2015, plaintiff Michael Ackerman, individually and on behalf of others similarly situated, filed a putative class action lawsuit in the United States District Court of New Jersey alleging violation of the Telephone Consumer Protection Act (“TCPA”) by American Greetings Corporation and its subsidiary, AG Interactive, Inc. The plaintiff claims that defendants (1) sent plaintiff an unsolicited text message notifying plaintiff that he had received an ecard; and (2) knowingly and/or willfully violated the TCPA, which prohibits unsolicited automated or prerecorded telephone calls, including faxes and text messages, sent to cellular telephones. Plaintiff seeks to certify a nationwide class based on unsolicited text messages sent by defendants during the period February 8, 2011 through February 8, 2015. The plaintiff seeks damages in the statutory amount of $500 for each and every violation of the TCPA and $1,500 for each and every willful violation of the TCPA. The Corporation believes the plaintiff’s allegations in this lawsuit are without merit and intends to defend the action vigorously.

With respect to theAckerman case, management is unable to estimate a range of reasonably possible losses as (i) the aggregate damages have not been specified, (ii) the proceeding is in the early stages, (iii) there is uncertainty as to the outcome of pending and anticipated motions, and/or (iv) there are significant factual issues to be ~~resolved,~~resolved. However, management does not believe, based on currently available information, that the outcome of this proceeding will have a material adverse effect on the Corporation’s business, consolidated financial ~~condition,~~position or results of operations, although the outcome could be material to the Corporation’s operating results for any particular period, depending, in part, upon the operating results for such period. ~~Please refer to Item 1. Legal Proceedings included in Part II – Other Information of this Form 10-Q for a description of the Smith and Hourcade lawsuit.~~

The Corporation’s provision for income taxes in interim periods is computed by applying its estimated annual effective tax rate against income before income tax expense for the period. In addition, non-recurring or discrete items are recorded during the period in which they occur. The magnitude of the impact that discrete items have on the Corporation’s quarterly effective tax rate is dependent on the level of income in the period. The effective tax rate was ~~35.7%~~21.0% and ~~27.6%~~31.7% for the three and ~~nine~~six months ended ~~November~~August 28, ~~2014,~~2015, respectively, and ~~8.6%~~33.8% and ~~49.1%~~26.0% for the three and ~~nine~~six months ended ~~November~~August 29, ~~2013,~~2014, respectively. The lower than statutory rate for the ~~nine months ended November 28, 2014~~three and six month periods are primarily related to the release of a $4.3 million unrecognized tax benefit due to the issuance of regulations that clarified the law and the expiration of a statute of limitations, as well as the impact of lower tax rates in foreign jurisdictions, domestic production activities deduction and the tax treatment of corporate-owned life insurance. The lower than statutory rate in the prior period was due primarily to ~~both~~ the recording of a net ~~$4.1~~$3.1 million federal tax refund and related interest attributable to fiscal 2000 and the error corrections ~~identified in the current year first quarter and~~ recorded in accordance with ASC Topic 250, Accounting Changes and Error Corrections. The net impact of the error corrections was a reduction to income tax expense of $4.1 million. During the first quarter of fiscal 2015, the Corporation identified and corrected errors in the accounting for income taxes that related to the year ended February 28, 2014. These errors primarily related to the Corporation’s failure to consider all sources of available taxable income when assessing the need for a valuation allowance against certain deferred tax assets and the recognition of a liability for an uncertain tax position. These errors were the result of the significant complexity created as a result of the ~~Merger and related transactions~~going private transaction in fiscal 2014. ~~See~~

As discussed in Note ~~1 for further information. The lower than statutory rate~~7, the Corporation recorded an adjustment to mark to market the value of one of its investments as of August 28, 2015. As a result, a decrease in the Corporation’s deferred tax assets in the amount of $22.0 million was recognized in other comprehensive income for the ~~three~~six months ended November 29, 2013 was due primarily to the release of reserves upon lapse of the applicable statutes and related to positions that had been effectively settled under audit. The higher than statutory rate for the nine months ended November 29, 2013 was due primarily to the recording of an $8.0 million valuation allowance against certain net operating loss and foreign tax credit carryforwards which the Corporation believed at the time would expire unused as a result of the Merger.August 28, 2015.

At ~~November~~August 28, ~~2014,~~2015, the Corporation had unrecognized tax benefits of ~~$21.6~~$16.9 million that, if recognized, would have a favorable effect on the Corporation’s income tax expense of ~~$19.1~~$15.3 million. During the nine months ended November 28, 2014, the Corporation’s unrecognized tax benefits increased $2.6 million as a result of uncertain tax positions taken in the Corporation’s most recently filed tax returns and error corrections related to the uncertain tax position as discussed above. It is reasonably possible that the Corporation’s unrecognized tax positions as of November 28, 2014 could decrease $3.0 million during the next twelve months due to anticipated settlements and resulting cash payments related to tax years which are open to examination.

The Corporation recognizes interest and penalties accrued on unrecognized tax benefits and refundable income taxes as a component of income tax expense. During the ~~nine~~six months ended ~~November~~August 28, ~~2014,~~2015, the Corporation recognized a net benefit of ~~$3.8~~$1.2 million for interest and penalties on unrecognized tax benefits and refundable income taxes. As of ~~November~~August 28, ~~2014,~~2015, the total amount of gross accrued interest and penalties related to unrecognized tax benefits less refundable income taxes was a net payable of ~~$0.6~~$1.6 million.

The Corporation is subject to examination by the ~~IRS~~Internal Revenue Service for tax years 2010 to the present and various U.S. state and local jurisdictions for tax years 2001 to the present. The Corporation is also subject to tax examination in various international tax jurisdictions, including Canada, the United Kingdom, Australia, Italy, Mexico and New Zealand for tax years 2006 to the present.

In May 2011, the Corporation announced that it will be relocating its world headquarters to a new location in the City of Westlake, Ohio, in a mixed-use development known as Crocker Park (the “Crocker Park Development”), which offers a vibrant urban setting, with retail stores and restaurants, offices and apartments. After putting the project on hold pending the outcome of the going private transaction, the Corporation announced plans in October

2013 to resume the project and, on March 26, 2014, the Corporation purchased from Crocker Park, LLC, the owner of the Crocker Park Development, 14.48 acres of land at the south end of the Crocker Park Development (the ~~“Crocker~~

“Crocker Park Site”) on which the new world headquarters will be built. The purchase price for the land was $7.4 million (based on a per acre price of $510 thousand). Morry Weiss, the Chairman of the board of the Corporation, Zev Weiss and Jeffrey Weiss, directors and the Co-Chief Executive Officers of the Corporation, and Gary and Elie Weiss, directors and non-executive officers of the Corporation, together with members of their family (collectively, the “Weiss Family”), indirectly own a minority stake in Crocker Park, LLC through their indirect ownership of approximately 37% of the membership interests in Crocker Park, LLC. In addition, Morry Weiss and other members of the Weiss Family have guaranteed certain of Crocker Park, LLC’s obligations, and are expected to guarantee additional obligations of Crocker Park, LLC, incurred in connection with the Crocker Park Development. The authority to conduct, manage and control the business of Crocker Park, LLC, including operating the Crocker Park Development and the decision whether to sell the Crocker Park Site to American Greetings, was reserved to the manager of Crocker Park, LLC, who is not an affiliate of the Weiss Family and ~~that~~who is an affiliate of Stark Enterprises, Inc.

The Corporation is leasing a portion of the Crocker Park Site to H L & L, which ~~will construct~~is constructing the new world headquarters building on the Crocker Park Site and, when complete, will sublease the new world headquarters building back to the Corporation. In addition, to accommodate additional office needs, H L & L is constructing an additional approximately 60,000 square foot building adjacent to the world headquarters building and a surface parking lot on land that it is leasing from the Corporation. The Corporation has ~~also~~ entered into an operating leases to lease ~~with~~these buildings from H L & L, ~~for the use of the new world headquarters building,~~which are anticipated to be available for occupancy in calendar year 2016. The initial lease ~~term is~~terms are fifteen years and will begin upon occupancy. The total annual rent is expected to be approximately ~~$9.5~~$10.6 million. See Note 11 for further information. ~~Please refer~~

Although the majority of the costs to construct the new world headquarters is expected to be financed through H L & L, due to the ~~Corporation’s Annual Report on Form 10-K for~~inherent difficulty in estimating costs associated with projects of this scale and nature, the ~~fiscal year ended February 28,~~costs associated with this project may be higher than expected and the Corporation may have to dedicate additional funds to the project, including providing additional funds to H L & L. As a result, effective as of December 1, 2014, ~~for~~the Corporation entered into a ~~description of~~loan agreement with H L & L under which the ~~transactions~~Corporation may from time to time make revolving loans to H L & L. Loans made to H L & L under this agreement may only be used to fund construction costs associated with the world headquarters ~~relocation.~~project and the maximum principal and market-rate interest that may be outstanding as of any given time under this loan agreement may not exceed $9 million. No loans to HL&L were outstanding as of August 28, 2015 and February 28, 2015.

From time to time employees of the Corporation may provide services to its parent companies as well as companies that are owned or controlled by members of the Weiss ~~family,~~Family, in each case provided that such services do not interfere with the Corporation’s employees’ ability to perform services on its behalf. When providing such services, the affiliated companies reimburse the Corporation for such services, based on the costs of employing the individual (including salary and benefits) and the amount of time spent by such employee in providing services to the affiliated company.

~~During the nine months ended November 28, 2014, the~~The Corporation, ~~paid cash dividends in the aggregate amount of $24.2 million to Century Intermediate Holding Company,~~ its parent and ~~sole shareholder, $14.3 million~~certain of ~~which was for~~their subsidiaries and affiliates file a consolidated U.S. federal income tax return. The Corporation pays all taxes on behalf of the purpose of paying interest on the $285.0 million aggregate principal amount 9.75%/10.50% Senior PIK Toggle Notes due 2019, which were issued by Century Intermediate Holding Company 2, an indirect parent of American Greetings. In addition, H L & L paid $9.9 million to the Corporation to acquire certain assets previously purchased by the Corporation related to the new world headquarters project, which isgroup included in ~~“Proceeds~~this consolidated federal income tax return. Pursuant to this tax sharing arrangement, amounts due to affiliates totaled $1.9 million as of February 28, 2015. No amounts were due to or due from ~~sale~~affiliates under this arrangement as of ~~fixed assets” on the Consolidated Statement of Cash Flows.~~August 28, 2015.

The Corporation has North American Social Expression Products, International Social Expression Products, Retail Operations, AG Interactive and ~~non-reportable~~Non-reportable segments. The North American Social Expression Products segment primarily designs, manufactures and ~~International Social Expression Products segments primarily design, manufacture and sell~~sells greeting cards and other related products through various channels of distribution with mass merchandising as the primary channel. The International Social Expression Products segment primarily designs and sells greeting cards and other related products through various channels of distribution and is located principally in the United Kingdom, Australia and New Zealand. At ~~November~~August 28, ~~2014,~~2015, the Retail Operations segment operated ~~415~~405 card and gift retail stores in the United Kingdom.

The stores sell products purchased from the International Social Expression Products segment as well as products purchased from other vendors. AG Interactive distributes social expression products, including electronic greetings and a broad range of graphics and digital services and products, through a variety of electronic channels, including Web sites, Internet portals and electronic mobile devices. ~~The~~For the three and six months ended August 28, 2015, the Corporation’s ~~non-reportable operating~~Non-reportable segment primarily includes licensing ~~activities~~activities. For the three and six months ended August 29, 2014, the Non-reportable segment also included the design, manufacture and sale of display fixtures. The display fixtures business was sold on the last day of the ~~second~~ quarter ended August 29, 2014. See Note 4 for further information.

   Three Months Ended Nine Months Ended
(In thousands)    November 28,
2014 November 29,
2013 November 28,
2014 November 29,
2013
Total Revenue:

North American Social Expression Products
   $ 360,704    $ 342,185    $ 966,751    $ 932,166
International Social Expression Products
   96,424    94,639    239,914    228,812
Intersegment items
   (28,234 ) (24,200 ) (49,533 ) (44,029 )


Net
   68,190    70,439    190,381    184,783
Retail Operations
   64,398    64,875    213,303    202,325
AG Interactive
   15,149    15,935    44,093    45,139
Non-reportable segment
   5,617    14,082    35,539    60,827


   $ 514,058    $ 507,516    $ 1,450,067    $ 1,425,240


	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
(In thousands)	November 28, 2014			November 29, 2013			November 28, 2014			November 29, 2013			August 28, 2015			August 29, 2014			August 28, 2015			August 29, 2014
Segment Earnings (Loss):
Total Revenue:
North American Social Expression Products	$	37,613		$	22,894		$	134,807		$	124,286		$	285,556		$	276,990		$	621,160		$	606,047
International Social Expression Products		8,547			8,539			12,303			13,278			65,858			68,451			128,026			143,490
Intersegment items		(5,362	)		(2,297	)		(7,102	)		(6,022	)		(11,286	)		(11,234	)		(21,599	)		(21,299	)

Net		3,185			6,242			5,201			7,256			54,572			57,217			106,427			122,191
Retail Operations		(16,578	)		(12,825	)		(35,181	)		(25,261	)		65,503			69,741			137,311			148,905
AG Interactive		6,131			3,477			17,507			9,955			13,736			14,445			27,166			28,944
Non-reportable segment		5,080			5,710			7,789			23,151			1,661			14,032			2,407			29,922
Unallocated
Interest expense		(9,533	)		(8,454	)		(27,782	)		(18,199	)
Profit-sharing plan expense		(2,041	)		(407	)		(7,509	)		(4,872	)
Stock-based compensation expense		—			—			—			(13,596	)
Corporate overhead expense		(6,335	)		(13,022	)		12,633			(40,877	)

		(17,909	)		(21,883	)		(22,658	)		(77,544	)	$	421,028		$	432,425		$	894,471		$	936,009

	$	17,522		$	3,615		$	107,465		$	61,843

For the nine months ended November 29, 2013, stock-based compensation in the table above includes non-cash stock-based compensation prior to the Merger and the impact of the settlement of stock options and the cancellation or modification of outstanding restricted stock units and performance shares concurrent with the Merger, a portion of which was non-cash. There is no stock-based compensation subsequent to the Merger as these plans were converted into cash compensation plans at the time of the Merger.

“Corporate overhead expense” includes costs associated with corporate operations including, among other costs, senior management, corporate finance, legal, and insurance programs.

For the ~~nine~~six months ended ~~November~~August 28, ~~2014, “Corporate overhead expense” included~~2015, Non-reportable segment earnings includes a ~~net~~ gain onof $61.6 million from the sale of ~~AGI In-Store of $38.7 million.~~Strawberry Shortcake. See Note 4 for further information.

For both the three and ~~nine~~six month periods ended ~~November~~August 28, ~~2014,~~2015, “Corporate overhead expense” ~~included interest~~includes income recognized from state tax credits of ~~$2.5 million related to the Clinton Cards liquidation.~~$6.5 million. See Note 6 for further information.

During the ~~current~~prior year second quarter, the Corporation sold its current world headquarters location and incurred a non-cash loss on disposal of $15.5 million, of which $13.3 million was recorded within the North American Social Expression Products segment and $2.2 million was recorded in “Corporate overhead expense”. See Note 4 for further information

For both the ~~nine months~~three and six month periods ended ~~November~~August 29, ~~2013,~~2014, “Corporate overhead expense” included~~non-recurring~~ ~~Merger-related transaction costs~~ the gain on sale of ~~approximately $17.4 million and a gain totaling $3.3 million related to a cash distribution received in connection with the Corporation’s minority investment in the common stock~~AGI In-Store of ~~Party City.~~$38.8 million. See Note 4 for further information.

Termination benefits are primarily considered part of an ongoing benefit arrangement, accounted for in accordance with ASC Topic 712, “Compensation – Nonretirement Postemployment Benefits,” and are recorded when payment of the benefits is probable and can be reasonably estimated.

The balance of the severance accrual was ~~$4.5~~$2.1 million, ~~$4.0~~$4.3 million and ~~$2.5~~$3.5 million at ~~November~~August 28, ~~2014,~~2015, February 28, ~~2014~~2015 and ~~November~~August 29, ~~2013,~~2014, respectively. The payments expected within the next twelve months are included in “Accrued liabilities” while the remaining payments beyond the next twelve months are included in “Other liabilities” on the Consolidated Statement of Financial Position.

From time to time the Corporation grants to third parties rights in its intellectual property, including rights to utilize intellectual property as well as rights to receive royalties and other revenue generated by the intellectual property. In order to secure complete control and ownership over the rights in certain character properties that the Corporation previously granted to a third party (the “Character Property Rights”), on December 18, 2014, the Corporation paid $37.7 million to purchase these Character Property Rights. In addition to the $37.7 million paid for these rights, in the event of a future sale of these Character Property Rights and the associated character properties, the Corporation may be required, depending on the proceeds of such sale, to pay up to an additional $4.0 million of the proceeds that it receives from any such sale.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our unaudited consolidated financial statements. This discussion and analysis, and other statements made in this Report, contain forward-looking ~~statements, see~~statements. See “Factors That May Affect Future Results” at the end of this discussion and analysis for a description of the uncertainties, risks and assumptions associated with these statements. Unless otherwise indicated or the context otherwise requires, the “Corporation,” “we,” “our,” “us” and “American Greetings” are used in this Report to refer to the businesses of American Greetings Corporation and its consolidated subsidiaries.

Total revenue for the current year ~~third~~second quarter was ~~$514.1~~$421.0 million, ~~an increase~~a decrease of ~~$6.5~~$11.4 million or ~~1.3%~~2.6% compared to the prior year period. This ~~improvement~~decrease was primarily the result of ~~increased sales~~foreign currency translation, which had an unfavorable impact of greeting cards and higher sales of gift wrap, party goods and other ancillary product, primarily within the North American Social Expression Products segment. These improvements were partially offset byapproximately $16 million, as well as lower revenues ~~from~~for our Non-reportable segment due to the sale of our display fixtures business ~~which was sold~~ at the end of the ~~current~~prior year second quarter ~~as well as~~and the ~~impact of unfavorable foreign currency movements.~~

~~While Christmas seasonal cards sales within our third quarter results were down compared to the prior year, we are encouraged by positive trends that we are seeing from preliminary point of~~ sale ~~(“POS”) data that we are receiving subsequent to quarter end from some~~ of our ~~North American customers~~Strawberry Shortcake property and related ~~to Christmas seasonal~~intangible assets and licensing agreements (“Strawberry Shortcake”) at the beginning of the current year first quarter. These impacts were partially offset by higher sales of gift packaging, party goods and greeting cards. Based on the preliminary POS data that we have received from customers representing approximately 90% of our North American greeting cards sales for Christmas as measured against prior year Christmas sales, we believe that our North American Christmas greeting card sales are trending favorably versus the prior Christmas season at about a 6% increase. While we are cautiously optimistic given this early information, these estimates of sales performance are based on preliminary POS data provided by our customers, which are not subject to accounting controls and are therefore subject to change based on our actual results for the 2014 Christmas seasonal card program.

~~Third~~Second quarter operating income was ~~$25.4~~$37.4 million, ~~an increase~~a decrease of ~~$12.3~~$6.1 million compared to the prior period. The improvement was achieved within the North American Social Expression Products and AG Interactive segments, partially offset by lower earnings from the International Social Expression Products and Retail Operations segments.

~~The current year third quarter includes the unfavorable impact of approximately $1 million related to scan-based trading (“SBT”) implementations, which was flat compared to~~same period in the prior year. The decline was driven by prior year ~~third quarter. The current year nine month period includes~~transactions that included the ~~unfavorable impact~~gain of ~~approximately $6~~$38.8 million ~~related to SBT implementations, which was approximately $2 million higher than the prior year.~~

~~Our financial results for the nine month period ended November 28, 2014 were significantly impacted by the following transactions.~~

~~On July 1, 2014, we sold our current world headquarters location and entered into an operating lease arrangement~~in connection with the new owner of the building. We expect to remain in our current location until the completion of our new world headquarters, which we anticipate will occur in calendar year 2016. Net of transaction costs, we received $13.5 million cash from the sale, and recorded a non-cash loss on disposal of $15.5 million during our second fiscal quarter, of which $13.3 million was recorded within the North American Social Expression segment and $2.2 million was recorded within the Unallocated segment.

~~On August 29, 2014, we completed the~~ sale of ~~our wholly-owned display fixtures business,~~ A.G. Industries, Inc. (dba AGI In-Store “AGI In-Store”), partially offset by the non-cash loss on disposal of $15.5 million related to ~~Rock-Tenn Company for $73.7 million in cash, subject to closing date working capital adjustments. We recognized a net gain~~the sale of ~~$38.7~~the current world headquarters location. The current quarter includes income of $6.5 million from tax credits received from the ~~sale, which was recorded within~~State of Ohio under certain incentive programs made available to us in connection with our decision to maintain our world headquarters in the ~~Unallocated segment.~~state of Ohio. Net of the above items, operating income increased due to improved earnings in our North American Social Expression Products and Retail Operations segment in addition to lower Corporate overhead costs.

Three months ended ~~November~~August 28, ~~2014~~2015 and ~~November~~August 29, ~~2013~~2014

Net income was ~~$11.3~~$24.5 million in the ~~third~~second quarter compared to ~~$3.3~~$22.8 million in the prior year period.

Our results for the three months ended ~~November~~August 28, ~~2014~~2015 and ~~November~~August 29, ~~2013~~2014 are summarized below:


(Dollars in thousands)	2014			% Total Revenue			2013			% Total Revenue			2015			% Total Revenue			2014			% Total Revenue
Net sales	$	508,006			98.8%		$	502,107			98.9%		$	418,611			99.4	%	$	427,090			98.8	%
Other revenue		6,052			1.2%			5,409			1.1%			2,417			0.6	%		5,335			1.2	%

Total revenue		514,058			100.0%			507,516			100.0%			421,028			100.0	%		432,425			100.0	%

Material, labor and other production costs		249,518			48.5%			244,829			48.2%			177,985			42.3	%		180,109			41.7	%
Selling, distribution and marketing expenses		175,039			34.1%			177,154			34.9%			153,641			36.5	%		165,834			38.3	%
Administrative and general expenses		64,829			12.6%			74,814			14.7%			59,365			14.1	%		66,850			15.5	%
Other operating income – net		(699	)		(0.1%	)		(2,368	)		(0.4%	)		(7,309	)		(1.7	%)		(23,828	)		(5.5	%)

Operating income		25,371			4.9%			13,087			2.6%			37,346			8.8	%		43,460			10.0	%

Interest expense		9,533			1.8%			8,454			1.7%			6,486			1.5	%		9,255			2.1	%
Interest income		(2,517	)		(0.5%	)		(29	)		(0.0%	)		(84	)		(0.0	%)		(30	)		(0.0	%)
Other non-operating expense – net		833			0.2%			1,047			0.2%
Other non-operating income – net														(54	)		(0.0	%)		(272	)		(0.1	%)

Income before income tax expense		17,522			3.4%			3,615			0.7%			30,998			7.3	%		34,507			8.0	%
Income tax expense		6,261			1.2%			310			0.0%			6,518			1.5	%	��	11,667			2.7	%

Net income	$	11,261			2.2%		$	3,305			0.7%		$	24,480			5.8	%	$	22,840			5.3	%

For the three months ended ~~November~~August 28, ~~2014,~~2015, consolidated net sales were ~~$508.0~~$418.6 million, updown from ~~$502.1~~$427.1 million in the prior year ~~third~~second quarter. This ~~1.2%~~2.0%, or ~~$5.9~~$8.5 million, ~~increase~~decrease was driven by ~~higher sales~~the unfavorable impact of ~~greeting cards~~foreign currency of approximately ~~$11~~$16 million and lower sales in our fixtures business of approximately $9 million due to the sale of that business at the end of the prior year second quarter. These decreases were partially offset by increased sales of gift packaging and party goods of approximately $3$12 million and higher sales of ~~other ancillary products~~greeting cards of approximately $4$5 million. ~~These increases were partially offset by lower sales of fixtures of approximately $9 million due to the sale of the display fixtures business in the~~The current year ~~second quarter. In addition, foreign currency translation had~~quarter includes an unfavorable impact ~~on net sales~~ of approximately ~~$3 million.~~$1.5 million related to SBT implementations, which is flat to the prior year quarter.

Other revenue, primarily royalty revenue from our ~~Strawberry Shortcake and Care Bears~~character properties, ~~increased $0.6~~decreased $2.9 million during the three months ended ~~November~~August 28, ~~2014.~~2015. In March 2015, we completed the sale of Strawberry Shortcake. As such, royalty revenue related to Strawberry Shortcake for the prior year three month period does not have a comparative amount in the current year.

Unit and pricing comparatives (on a sales less returns basis), excluding intercompany eliminations, for the three months ended ~~November~~August 28, ~~2014~~2015 and ~~November~~August 29, ~~2013~~2014 are summarized below:


	Increase (Decrease) From the Prior Year															Increase (Decrease) From the Prior Year
	Everyday Cards					Seasonal Cards					Total Greeting Cards					Everyday Cards						Seasonal Cards						Total Greeting Cards
	2014		2013			2014			2013		2014		2013			2015			2014			2015			2014			2015			2014
Unit volume		2.0%		(4.5%	)		(4.3%	)		8.2%		0.5%		(1.7%	)		(1.1	%)		1.1	%		10.9	%		(3.8	%)		1.2	%		0.1	%
Selling prices		4.8%		2.5%			(2.6%	)		0.0%		3.0%		1.9%			2.0	%		4.2	%		(1.1	%)		13.0	%		1.4	%		5.9	%
Overall increase / (decrease)		6.9%		(2.1%	)		(6.8%	)		8.2%		3.6%		0.2%			0.9	%		5.3	%		9.6	%		8.7	%		2.6	%		6.0	%

During the ~~third~~second quarter, combined everyday and seasonal greeting card sales less returns increased ~~3.6%~~2.6% compared to the prior year quarter, including increases in selling prices of ~~3.0%~~1.4% and unit volume of ~~0.5%~~1.2%. The overall increase ~~in selling price~~ was driven by increased selling prices of everyday greeting cards in ~~both~~ our North American Social Expression Products segment and increased seasonal units in our North American Social Expressions Products and International Social ~~Expression~~Expressions Products segments.

Everyday card sales less returns for the ~~third~~second quarter increased ~~6.9%~~0.9% due to increases in selling prices of ~~4.8% and improvement~~2.0%, offset by a decrease in unit volume of ~~2.0%~~1.1%. The selling price increase was driven by general price increases ~~and favorable product mix~~ within the core product line, which more than offset the continued unfavorable shift to a higher proportion of value cards. The unit volume ~~improvement~~decline was primarily ~~driven by additional distribution~~due to ~~new customers~~lower sales in our North American Social Expression Products segment.

Seasonal card sales less returns ~~decreased 6.8%~~increased 9.6% during the ~~third~~second quarter, including a ~~2.6%~~10.9% increase in unit volume offset by a decrease in selling ~~prices and a decrease~~price of 1.1%. Since the second quarter has the fewest holidays, the change in ~~unit volume of 4.3%. The decrease in both the~~ selling prices and unit volume ~~for the quarter~~appear large on a percentage basis compared to other quarters. The increase in unit volume was driven by ~~our Christmas program~~the Father’s Day programs in ~~both~~ our North American Social Expression Products and International Social Expression Products ~~segments.~~segments and the Graduation program in our North American Social Expression Products segment, partially offset by a decrease in the Fall program in our North American Social Expression Products segment. The selling price decrease was primarily driven by the Father’s Day program in our International Social Expression Products segment, partially offset by an increase in the Fall program in our North American Social Expression Products segment.

Material, labor and other production costs (“MLOPC”) for the three months ended ~~November~~August 28, ~~2014~~2015 were ~~$249.5~~$178.0 million, compared to ~~$244.8~~$180.1 million in the prior year three months. As a percentage of total revenue, these costs were ~~48.5%~~42.3% in the current period compared to ~~48.2%~~41.7% for the three months ended ~~November~~August 29, ~~2013.~~2014. The ~~$4.7~~$2.1 million dollar ~~increase~~decrease was primarily due to the favorable impact of ~~higher sales and unfavorable product mix in the current year third quarter. Partially offsetting these increases were lower costs related to product display material costs~~foreign currency translation of approximately $7 million and the elimination of costs related to the display fixtures business that was sold in the ~~current~~prior year second ~~quarter~~quarter. Partially offsetting these decreases were higher product content and production expenses, unfavorable product mix and the impact of higher sales volume in the wholesale card businesses and lower margins on slightly higher volumes in the Retail Operations segment.

Selling, distribution and marketing (“SDM”) expenses for the three months ended ~~November~~August 28, ~~2014~~2015 were ~~$175.0~~$153.6 million, decreasing ~~$2.2~~$12.2 million from ~~$177.2~~$165.8 million in the prior year ~~third~~second quarter. As a percentage of total revenue, these costs were ~~34.1%~~36.5% in the current period compared to ~~34.9%~~38.3% for the prior year period. The dollar decrease in the current year second quarter was driven by lower ~~sales,~~supply chain costs of approximately $2 million, lower marketing and product management ~~expenses~~costs of approximately $1 million, the elimination of approximately $1 million of costs related to the fixture business that was sold in the prior year second quarter and the favorable impact of foreign currency translation of approximately $1$8 million.

Administrative and general expenses were ~~$64.8~~$59.4 million for the three months ended ~~November~~August 28, ~~2014,~~2015, a decrease of ~~$10.0~~$7.5 million from ~~$74.8~~$66.9 million for the three months ended ~~November~~August 29, ~~2013.~~2014. This decrease was driven primarily by lower ~~variable compensation expense. The prior year quarter included~~retail expenses of approximately ~~$10~~$3 million, the elimination of approximately $1 million of ~~higher variable compensation expense~~costs related to ~~a combination of an adjustment to~~the display fixture business that was sold in the prior year ~~expected variable compensation program payout and~~second quarter, the ~~establishment during the prior year third quarter~~favorable impact of a long-term incentive program to replace the prior stock-based compensation programs. The adjustment to the prior year variable compensation program was necessary as it was probable, based on the year-to-date operating results, that we would exceed previously established performance targets. Higher technology costsforeign currency translation of approximately $2 million ~~were offset by~~and other ~~general cost~~costs savings of ~~which no items were individually significant, of~~ approximately $2$1 million.

Other operating income – net was ~~$0.7~~$7.3 million for the three months ended ~~November~~August 28, ~~2014~~2015 compared to ~~$2.4~~$23.8 million for the prior year ~~third~~second quarter. InThe current year period includes income of $6.5 million from tax credits received from the ~~prior year third quarter, based on updated estimated recovery information provided~~State of Ohio under certain incentive programs made available to us in connection with our decision to maintain our world headquarters in the ~~Clinton Cards bankruptcy administration, we~~state of Ohio. The prior year period included the gain on the sale of AGI In-Store of $38.8 million which was partially offset by a non-cash loss recorded ~~an adjustment to~~upon the ~~Clinton Cards debt impairment resulting in a gain~~sale of ~~$1.8~~our current world headquarters location of $15.5 million.

Other non-operating income ~~was $2.5 million~~– net for the three months ended ~~November~~August 28, ~~2014 compared to $29.0 thousand for~~2015 was $0.1 million, decreasing $0.2 million from $0.3 million in the ~~quarter ended November 29, 2013. During the third quarter of the current~~prior year as part of the Clinton Cards bankruptcy administration, we received a cash distribution as part of the liquidation process that included $2.5 million of interest on our senior secured debt of Clinton Cards that was previously not expected to be received.second quarter.

The effective tax rate was ~~35.7%~~21.0% and ~~8.6%~~33.8% for the three months ended ~~November~~August 28, ~~2014~~2015 and ~~November~~August 29, ~~2013,~~2014, respectively. The ~~significantly~~ lower than statutory rate for the current period is primarily related to the release of a $4.3 million unrecognized tax benefit due to the issuance of regulations that clarified the law and the expiration of a statute of limitations, as well as the impact of lower tax rates in foreign jurisdictions, domestic production activities deduction and the tax treatment of certain corporate-owned life insurance policies. The lower than statutory rate in the prior ~~year quarter~~period was due primarily to the ~~release~~favorable settlement of ~~reserves upon lapse of the applicable statutes and related to positions that had been effectively settled under audit.~~state audits.

~~Nine~~Six months ended ~~November~~August 28, ~~2014~~2015 and ~~November~~August 29, ~~2013~~2014

Net income was ~~$77.8~~$97.2 million in the ~~nine~~six months ended ~~November~~August 28, ~~2014~~2015 compared to ~~$31.5~~$66.6 million in the prior year ~~nine~~six months.

Our results for the ~~nine~~six months ended ~~November~~August 28, ~~2014~~2015 and ~~November~~August 29, ~~2013~~2014 are summarized below:


(Dollars in thousands)	2014			% Total Revenue			2013			% Total Revenue			2015			% Total Revenue			2014			% Total Revenue
Net sales	$	1,432,370			98.8%		$	1,406,319			98.7%		$	890,503			99.6	%	$	924,364			98.8	%
Other revenue		17,697			1.2%			18,921			1.3%			3,968			0.4	%		11,645			1.2	%

Total revenue		1,450,067			100.0%			1,425,240			100.0%			894,471			100.0	%		936,009			100.0	%

Material, labor and other production costs		630,413			43.5%			625,340			43.9%			373,459			41.8	%		380,895			40.7	%
Selling, distribution and marketing expenses		513,132			35.4%			502,500			35.3%			317,400			35.5	%		338,093			36.1	%
Administrative and general expenses		200,974			13.8%			228,578			16.0%			117,586			13.1	%		136,145			14.5	%
Other operating income – net		(26,495	)		(1.8%	)		(6,647	)		(0.5%	)		(69,729	)		(7.8	%)		(25,796	)		(2.7	%)

Operating income		132,043			9.1%			75,469			5.3%			155,755			17.4	%		106,672			11.4	%

Interest expense		27,782			1.9%			18,199			1.3%			14,599			1.6	%		18,249			1.9	%
Interest income		(2,658	)		(0.2%	)		(222	)		(0.0%	)		(183	)		(0.0	%)		(141	)		(0.0	%)
Other non-operating income – net		(546	)		(0.0%	)		(4,351	)		(0.3%	)		(992	)		(0.1	%)		(1,379	)		(0.1	%)

Income before income tax expense		107,465			7.4%			61,843			4.3%			142,331			15.9	%		89,943			9.6	%
Income tax expense		29,625			2.0%			30,366			2.1%			45,087			5.0	%		23,364			2.5	%

Net income	$	77,840			5.4%		$	31,477			2.2%		$	97,244			10.9	%	$	66,579			7.1	%

For the ~~nine~~six months ended ~~November~~August 28, ~~2014,~~2015, consolidated net sales were ~~$1.43 billion, up~~$890.5 million, down from ~~$1.41 billion~~$924.4 million in the prior year ~~nine~~six months. This ~~1.9%~~3.7%, or ~~$26.1~~$33.9 million, ~~increase~~decrease was driven by ~~higher~~the unfavorable impact of foreign currency translation of approximately $33 million, lower sales from our display fixture business of approximately $20 million due to the sale of that business at the end of the prior year second quarter, and lower card sales of ~~greeting cards of~~ approximately ~~$37 million,~~$5 million. These decreases were partially offset by increased sales of gift packaging and party goods of approximately $4$21 million and the favorable impact of ~~foreign currency~~fewer SBT implementations of approximately ~~$15~~$3 million. ~~These increases were partially offset by lower sales from our display fixtures business, which was sold~~The impact of SBT implementations in the current year ~~second quarter, of approximately $24 million, decreased sales of other ancillary products of approximately $3 million and the unfavorable impact of SBT implementations~~six months was a charge of approximately $2 million.

Other revenue, primarily royalty revenue from ~~our Strawberry Shortcake and Care Bears~~certain character properties, decreased ~~$1.2~~$7.7 million in the ~~nine~~six months ended ~~November~~August 28, ~~2014~~2015 compared to the same period in the prior year. In March 2015, we completed the sale of Strawberry Shortcake. As such, royalty revenue related to Strawberry Shortcake for the prior year six month period does not have a comparative amount in the current year.

Unit and pricing comparatives (on a sales less returns basis), excluding intercompany eliminations, for the ~~nine~~six months ended ~~November~~August 28, ~~2014~~2015 and ~~November~~August 29, ~~2013~~2014 are summarized below:


	Increase (Decrease) From the Prior Year															Increase (Decrease) From the Prior Year
	Everyday Cards						Seasonal Cards					Total Greeting Cards				Everyday Cards						Seasonal Cards						Total Greeting Cards
	2014			2013			2014		2013			2014		2013		2015			2014			2015			2014			2015			2014
Unit volume		(0.3%	)		(1.0%	)		0.8%		3.7%			0.0%		0.2%		(1.2	%)		(1.4	%)		(0.7	%)		4.2	%		(1.0	%)		0.1	%
Selling prices		4.9%			2.6%			1.9%		(0.1%	)		4.1%		1.9%		2.0	%		4.9	%		0.3	%		2.0	%		1.5	%		4.1	%
Overall increase / (decrease)		4.5%			1.6%			2.7%		3.6%			4.0%		2.2%		0.8	%		3.4	%		(0.3	%)		6.3	%		0.5	%		4.2	%

During the ~~nine~~six months ended ~~November~~August 28, ~~2014,~~2015, combined everyday and seasonal greeting card sales less returns increased ~~4.0%~~0.5% compared to the prior year ~~nine~~six months. The overall increase was primarily driven by increases in selling prices from our everyday ~~and seasonal~~ greeting cards in our North American Social Expression ~~Products segment and everyday greeting cards in our International Social Expression Products segment.~~Products.

Everyday card sales less returns were up ~~4.5%~~0.8 % compared to the prior year ~~nine~~six months, as a result of increases in selling prices of ~~4.9%~~2.0%, partially offset by a decline in unit volume of ~~0.3%~~1.2%. The increase in selling prices was driven by general price increases ~~and favorable product mix~~ within the core product line, which more than offset the continued unfavorable shift to a higher proportion of value cards. The unit volume decline was primarily driven by ~~soft~~lower sales within our ~~International~~North American Social Expression Products segment.

Seasonal card sales less returns ~~increased 2.7%~~decreased 0.3%, with a unit volume ~~growth~~decline of ~~0.8%~~0.7% and a selling price ~~increases~~increase of ~~1.9%~~0.3%. The ~~increase~~decrease in unit volume was attributable to the Fall program in our ~~Mother’s Day program, partially offset by our Christmas~~North American Social Expression Products segment, Easter program in both our North American Social Expression Products and International Social Expression Products segments and Mother’s Day program in our ~~Easter~~International Social Expression Products segment, partially offset by increases in the Father’s Day program ~~within~~in our International Social Expression Products segment and Graduation program in our North American Social Expression Products segment. The increase in selling prices was driven by ~~our Father’s Day~~the Fall and Graduation programs in our North American Social Expression Products segment.

MLOPC for the ~~nine~~six months ended ~~November~~August 28, ~~2014~~2015 were ~~$630.4~~$373.5 million, ~~an increase~~a decrease of ~~$5.1~~$7.4 million from ~~$625.3~~$380.9 million for the comparable period in the prior year. As a percentage of total revenue, these costs were ~~43.5%~~41.8% in the current period compared to ~~43.9%~~40.7% for the ~~nine~~six months ended ~~November~~August 29, ~~2013.~~2014. The $7.4 million dollar ~~increase~~decrease was primarily due to the ~~impact of higher sales and unfavorable product mix in the current year nine months as well as the unfavorable~~favorable impact of foreign currency translation of approximately ~~$8 million. Partially offsetting these increases were lower product display material costs~~$14 million and the elimination of costs related to the display fixtures business that was sold in the ~~current~~prior year second quarter. Partially offsetting these decreases were higher product content and production expenses, and the impact of higher sales volume in the wholesale card businesses and lower margins on slightly higher sales volumes in the Retail segment.

SDM expenses for the ~~nine~~six months ended ~~November~~August 28, ~~2014~~2015 were ~~$513.1~~$317.4 million, ~~increasing $10.6~~decreasing $20.7 million from ~~$502.5~~$338.1 million for the comparable period in the prior year. As a percentage of total revenue, these costs were ~~35.4%~~35.5% in the current period compared to ~~35.3%~~36.1% for the prior year period. The ~~increase~~decrease was primarily driven by ~~higher supply chain costs of approximately $4 million, increased retail store expenses of approximately $2 million and~~ the ~~unfavorable~~favorable impact of foreign currency translation of approximately ~~$10 million. Partially offsetting these increases were~~$16 million, lower ~~sales, marketing and product management expenses~~supply chain costs of approximately $4$3 million, lower expenses from our display fixture business of approximately $2 million due to the sale of that business in the prior year second quarter and other cost savings of approximately $2 million, offset by higher expenses in the Retail Operations segment of $3 million.

Administrative and general expenses were ~~$201.0~~$117.6 million for the ~~nine~~six months ended ~~November~~August 28, ~~2014,~~2015, a decrease of ~~$27.6~~$18.5 million from ~~$228.6~~$136.1 million in the prior year period. This decrease was driven primarily by the favorable impact of foreign currency translation of approximately $3 million, lower expenses from our display fixture business of approximately $2 million due to the sale of that business in the prior year ~~costs and fees~~second quarter, lower expenses in our Retail Operations segment of approximately $4 million, elimination of expenses related to the ~~going private transaction (See Note 1, “Basis of Presentation,” to the Consolidated Financial Statements for further information)~~former stock compensation program of approximately ~~$27~~$3 million, ~~that did not recur in the current year, lower costs in the AG Interactive segment driven by prior year cost savings initiatives~~decreased profit sharing expense of approximately $2 million and other general cost savings of approximately $2$4 million. In addition, the prior year included approximately $6 million of higher variable compensation expense primarily related to an adjustment to the prior year expected variable compensation program payout. The adjustment was necessary as it was probable, based on the year-to-date operating results, that we would exceed previously established performance targets. These decreases were partially offset by higher technology costs of approximately $6 million, increased costs in the Retail Operations segment and the unfavorable impact of foreign currency translation of approximately $2 million.

Other operating income – net was ~~$26.5~~$69.7 million for the ~~nine~~six months ended ~~November~~August 28, ~~2014~~2015 compared to ~~$6.6~~$25.8 million for the prior year ~~nine~~six month period. The ~~increase was driven primarily by~~current year six month period includes the ~~net~~gain on the sale of Strawberry Shortcake of $61.6 million and the income of $6.5 million from tax credits received from the State of Ohio under certain incentive programs made available to us in connection with our decision to maintain our world headquarters in the state of Ohio. The prior year six month period included the gain on the sale of AGI In-Store of ~~$38.7~~$38.8 million, ~~partially offset by a~~the non-cash loss recorded upon sale of our current world headquarters location of $15.5 million ~~both~~and the recovery of $3.4 million related Clinton Cards bankruptcy administration, which, ~~occurred in the current year second quarter. In addition, in both the current year and prior year nine month periods,~~ based on updated estimated recovery information provided ~~in connection with the Clinton Cards bankruptcy administration,~~ we recorded an impairment recovery related to the senior secured debt of Clinton Cards that we acquired in May 2012 and subsequently impaired. The recovery was $3.4 million for the nine months ended November 28, 2014 and $4.2 million for nine months ended November 29, 2013. The current year recovery represents the final amount of a full recovery of the impairment. The income related to the impairment recovery in the current year was partially offset by other expenses of $2.1 million related to the Clinton Cards bankruptcy administration.

Interest income was $2.7 million for the nine months ended November 28, 2014 compared to $0.2 million for the nine months ended November 29, 2013. During the third quarter of the current year, as part of the Clinton Cards bankruptcy administration, we received a cash distribution as part of the liquidation process that included $2.5 million of interest on our senior secured debt of Clinton Cards that was previously not expected to be received.

Other non-operating income – net for the nine months ended November 28, 2014 was $0.5 million, decreasing $3.9 million from $4.4 million in the prior year nine month period. The decrease was driven primarily by a gain of approximately $3.3 million in the prior year third quarter related to the Corporation’s investment in Party City that did not recur in the current year period.

The effective tax rate was ~~27.6%~~31.7% and ~~49.1%~~26.0% for the ~~nine~~six months ended ~~November~~August 28, 2015 and August 29, 2014, respectively. The lower than statutory rate for the six months ended August 28, 2015 is primarily related to the release of a $4.3 million unrecognized tax benefit due to the issuance of regulations that clarified the law and ~~November 29, 2013, respectively.~~the expiration of a statute of limitations, as well as the impact of lower tax rates in foreign jurisdictions, domestic production activities deduction and the tax treatment of corporate-owned life insurance. The lower than statutory rate in the ~~current~~prior period is due primarily to ~~both~~ the recording of a net ~~$4.1~~$3.1 million federal tax refund and related interest attributable to fiscal 2000 and the error corrections ~~identified in the current year first quarter and~~ recorded in accordance with Accounting Standards Codification (“ASC”) Topic 250, Accounting Changes and Error Corrections. The net impact of the error corrections was a reduction to income tax expense of $4.1 million. During the ~~first quarter of fiscal 2015,~~six months ended August 29, 2014, we identified and corrected errors in the accounting for income taxes that related ~~primarily~~ to the year ended February 28, 2014. These errors primarily related to our failure to consider all sources of available ~~taxable~~ income when assessing the need for a valuation allowance against certain deferred tax assets and the recognition of a liability for an uncertain tax position. These errors were the result of the significant complexity created as a result of the going private transaction that was completed in fiscal 2014. See Note 1, “Basis of Presentation,” to the Consolidated Financial Statements for further information. The higher than statutory rate in the prior period was due primarily to the recording of an $8.0 million valuation allowance against certain net operating loss and foreign tax credit carryforwards which we believed at the time would expire unused as a result of the going private transaction.

Our operations are organized and managed according to a number of factors, including product categories, geographic locations and channels of distribution. ~~Our~~The North American Social Expression Products segment primarily designs, manufactures and ~~International Social Expression Products segments primarily design, manufacture and sell~~sells greeting cards and other related products through various channels of distribution with mass ~~retailers~~merchandising as the primary channel. The International Social Expression Products segment primarily designs and sells greeting cards and other related products through various channels of distribution and is located principally in the United Kingdom, Australia and New Zealand. As permitted under ASC Topic 280 (“ASC 280”), “Segment Reporting,” certain operating segments have been aggregated into the International Social Expression Products segment. The aggregated operating divisions have similar economic characteristics, products, production processes, types of customers and distribution methods. At ~~November~~August 28, ~~2014,~~2015, we operated ~~415~~405 card and gift retail stores in the United Kingdom (“UK”) through our Retail Operations segment. These stores sell products purchased from the International Social Expression Products segment as well as products purchased from other vendors. The AG Interactive segment distributes social expression products, including electronic greetings, and a broad range of graphics and digital services and products, through a variety of electronic channels, including Web sites, Internet portals and electronic mobile devices. ~~The~~For the six months ended August 28, 2015, the Non-reportable segment primarily includes licensing ~~activities and~~activities. For the six months ended August 29, 2014, the Non-reportable segment also included the design, manufacture and sales of display fixtures. The display fixtures business was sold on the last day of the quarter ended August 29, 2014. See Note 4, “Dispositions,” to the Consolidated Financial Statements for further information.

Segment results are reported using actual foreign exchange rates for the periods presented. Refer to Note 18, “Business Segment Information,” to the Consolidated Financial Statements for further information and a reconciliation of total segment revenue to consolidated “Total revenue” and total segment earnings (loss) before tax to consolidated “Income before income tax expense.”


(Dollars in thousands)	Three Months Ended November				% Change			Nine months Ended November				% Change			Three Months Ended August				% Change			Six Months Ended August				% Change
(Dollars in thousands)	28, 2014		29, 2013		% Change			28, 2014		29, 2013		% Change			28, 2015		29, 2014		% Change			28, 2015		29, 2014		% Change
Total revenue	$	360,704	$	342,185		5.4	%	$	966,751	$	932,166		3.7	%	$	285,556	$	276,990		3.1	%	$	621,160	$	606,047		2.5	%
Segment earnings		37,613		22,894		64.3	%		134,807		124,286		8.5	%		46,209		27,830		66.0	%		119,336		97,194		22.8	%

Total revenue of our North American Social Expression Products segment increased ~~$18.5~~$8.6 million for the three months ended ~~November~~August 28, ~~2014~~2015 and increased ~~$34.6~~$15.1 million for the ~~nine~~six months ended ~~November~~August 28, ~~2014~~2015 compared to the prior year periods. The increase during the current quarter was primarily driven by higher gift packaging and party goods sales of approximately $12 million. These increases for the current quarter were partially offset the unfavorable impacts of foreign currency translation of approximately $4 million. The increase in total revenue for the six months ended August 28, 2015 was primarily driven by higher sales of gift packaging, party goods and other ancillary products of approximately $22 million and the favorable impact of fewer SBT Implementations of approximately $3 million, offset by lower sales of greeting cards of approximately ~~$11 million, higher sales of gift packaging and party goods of approximately~~ $3 million and ~~increased sales of other ancillary products of approximately $7 million. These increases were partially offset by~~ the unfavorable impact of foreign currency translation of approximately $2$7 million. The increase in total revenue for the nine months ended November 28, 2014 was primarily driven by higher sales of greeting cards of approximately $35 million, higher sales of gift packaging and party goods of approximately $5 million and increased sales of other ancillary products of approximately $3 million. These increases for the nine month period were partially offset by the unfavorable impacts of foreign currency translation and SBT implementations of approximately $5 million and $3 million, respectively.

Segment earnings increased ~~$14.7~~$18.4 million in the current three months compared to the three months ended ~~November~~August 29, ~~2013.~~2014. The ~~increase~~improvement was driven primarily by the impact of higher revenue, partially offset by unfavorable product mix as well as lower costs related to variable compensation expense (as noted above) of approximately $7 million. In addition, higher technology costs were offset by lower sales, marketing and product management expenses.

~~Segment earnings increased $10.5 million in the nine month period ended November 28, 2014 compared to the~~ prior year period. The increase was driven primarily by the impact of higher revenue as well as lower costs related to variable compensation expense (as noted above) of approximately $3 million. These increases were partially offset by a non-cash loss related to the sale of our current world headquarters location, of which approximately $13 million of the total loss of $15.5 million was recorded within the North American Social Expression Products ~~segment,~~segment. In addition, the current year includes the favorable impact of higher revenues, lower marketing and product management costs of approximately $1 million and lower supply chain costs of approximately $5$1 million, ~~and increased~~partially offset by higher technology costs of approximately $6$1 million.

Segment earnings increased $22.1 million in the six month period ended August 28, 2015 compared to the prior year period. The increase was driven primarily by the prior year non-cash loss related to the sale of our current world headquarters location, of which approximately $13 million of the total loss of $15.5 million was recorded within the North American Social Expression Products segment. In addition, the current year includes the favorable impact of higher revenues and lower supply chain costs of approximately $2 million, partially offset by higher technology costs of approximately $1 million.


(Dollars in thousands)	Three Months Ended November				% Change			Nine months Ended November				% Change			Three Months Ended August				% Change			Six Months Ended August					% Change
(Dollars in thousands)	28, 2014		29, 2013		% Change			28, 2014		29, 2013		% Change			28, 2015		29, 2014		% Change			28, 2015			29, 2014		% Change
Total revenue	$	68,190	$	70,439		(3.2	%)	$	190,381	$	184,783		3.0	%	$	54,572	$	57,217		(4.6	%)	$	106,427		$	122,191		(12.9	%)
Segment earnings		3,185		6,242		(49.0	%)		5,201		7,256		(28.3	%)		830		564		47.2	%		(3,429	)		2,016		—

Total revenue of our International Social Expression Products segment decreased ~~$2.2~~$2.6 million for the three ~~months~~month period ended ~~November~~August 28, ~~2014 and increased $5.6 million for the nine months ended November 28, 2014,~~2015 compared to the prior year ~~periods.~~comparable period. The decrease ~~during~~was primarily due to the ~~current quarter~~unfavorable impact of foreign currency translation of approximately $7 million offset by higher sales of greeting cards of approximately $4 million. Total revenue of our International Social Expression Products segment decreased $15.8 million for the six month period end August 28, 2015 compared to the prior year comparable period. The decrease was primarily due ~~primarily~~ to the unfavorable impact of foreign currency translation of approximately $13 million and lower sales of greeting cards of approximately $2 million. The increase for the current year nine month period was primarily due to the favorable impact of foreign currency translation of approximately $7 million and the favorable impact of fewer SBT implementations of approximately $1 million. Partially offsetting these increases were lower sales of greeting cards of approximately $1 million and decreased sales of other ancillary products of approximately $1 million compared to the prior year.

Segment earnings ~~decreased $3.1 million in~~remained flat year-over-year for the three months ended ~~November~~August 28, ~~2014~~2015 and August 29, 2014. The impact on earnings from increased greeting card sales and favorable supply chain expenses was offset by increases in product costs.

Segment earnings decreased $5.5 million in the six months ended August 28, 2015, compared to the ~~prior year period.~~six months ended August 29, 2014. The decreased earnings were primarily driven by ~~the impact on earnings from decreased greeting card~~lower sales ~~unfavorable~~and increased product ~~mix~~ and ~~upfront expenses related to cost savings initiatives.~~

Segment earnings decreased $2.1 million in the nine months ended November 28, 2014, compared to the nine months ended November 29, 2013. The decreased earnings were primarily driven by the impact on earnings from unfavorable product mix and upfront expenses related to cost savings initiatives,scrap costs, partially offset by ~~slightly~~ lower supply chain ~~and general and administrative costs.~~costs of approximately $2 million.


(Dollars in thousands)	Three Months Ended November						% Change				Nine months Ended November							% Change				Three Months Ended August							% Change				Six Months Ended August							% Change
	28, 2014			29, 2013						28, 2014				29, 2013							28, 2015				29, 2014							28, 2015				29, 2014
Total revenue	$	64,398		$	64,875			(0.7	%)		$	213,303			$	202,325			5.4	%		$	65,503			$	69,741			(6.1	%)		$	137,311			$	148,905			(7.8	%)
Segment loss		(16,578	)		(12,825	)		(29.3	%)			(35,181	)			(25,261	)		(39.3	%)			(12,615	)			(14,563	)		13.4	%			(20,758	)			(18,603	)		(11.6	%)

Total revenue of our Retail Operations segment decreased ~~slightly~~$4.2 million and $11.6 million for the three and six months ended ~~November~~August 28, ~~2014. For the nine month period ended November 28, 2014, revenue increased $11.0 million~~2015, respectively, compared to the prior year ~~period.~~periods. The ~~increase was~~decreases were driven by the impact of ~~favorable~~unfavorable foreign exchange translation of approximately $6 million and $13 million for the ~~nine~~three and six month ~~period.~~periods, respectively, partially offset by increases in greeting card and gift packaging sales. During the three and ~~nine~~six month periods ended ~~November~~August 28, ~~2014,~~2015, net sales at stores open one year or more were ~~down~~up approximately ~~0.7%~~2.2% and ~~1.7%~~0.8%, respectively, compared to the same periods in the prior year.

Segment earnings ~~decreased $3.8 million and $9.9~~increased $1.9 million in the three month period ended August 28, 2015 and ~~nine~~decreased $2.2 million in six months ended ~~November~~August 28, ~~2014,~~2015 compared to the prior year periods. The improved earnings in the second quarter were about half due to the favorable impact of foreign exchange translation on the loss and about half due to lower operating expenses. The lower segment earnings in the six month period were the result of lower gross margins resulting from promotional pricing activities and increased inventory shrink and scrap expense, partially offset by the favorable impact of foreign exchange translation on the loss.

Total revenue of AG Interactive decreased $0.7 million and $1.8 million for the three and six months ended August 28, 2015, respectively, compared to the prior year periods. ~~The lower segment earnings were the result of lower gross margins driven by promotional pricing activities and higher store operating costs.~~

~~Total revenue of AG Interactive decreased slightly for both the three and nine months ended November 28, 2014. This decrease~~These decreases in revenue ~~was~~were driven primarily by lower subscription revenue compared to the respective prior ~~year.~~year periods as well as the unfavorable impact of foreign exchange translation. At the end of the ~~third~~second quarter of fiscal ~~2015,~~2016, AG Interactive had approximately ~~3.5~~3.4 million online paid subscriptions compared to ~~3.7~~3.6 million at the end of the same period in the prior year.

Segment earnings ~~increased $2.7~~decreased $0.7 million and ~~$7.6~~$1.2 million for the three and ~~nine~~six months ended ~~November~~August 28, ~~2014, respectively,~~2015 primarily due to ~~cost savings initiatives initiated in~~ the ~~prior year.~~impact of lower revenue.


(Dollars in thousands)	Three Months Ended November				% Change			Nine months Ended November				% Change			Three Months Ended August						% Change				Six Months Ended August						% Change
(Dollars in thousands)	28, 2014		29, 2013		% Change			28, 2014		29, 2013		% Change			28, 2015			29, 2014						28, 2015				29, 2014			% Change
Total revenue	$	5,617	$	14,082		(60.1	%)	$	35,539	$	60,827		(41.6	%)	$	1,661		$	14,032		% Change		(88.2	%)		$	2,407		$	29,922			(92.0	%)
Segment earnings		5,080		5,710		(11.0	%)		7,789		23,151		(66.4	%)
Segment (loss) earnings																(934	)		(1,306	)		28.5	%			59,413			2,709			2093.2	%

Total revenue from our Non-reportable segment decreased ~~$8.5~~$12.4 million and ~~$25.3~~$27.5 million for the three and ~~nine~~six months ended ~~November~~August 28, ~~2014,~~2015, respectively, compared to the prior year periods. The decrease in revenue for the current year ~~third~~periods was due to the sale of our display fixture business at the end of the prior year second quarter

and the sale of Strawberry Shortcake at the beginning of the current year first quarter. Revenue of the display fixture business was $9.7 million for the three months ended August 29, 2014 and $20.2 million for the six months ended August 29, 2014. The remaining decrease in revenue was due primarily to the sale of the display fixtures business in the current year second quarter. Revenue in the prior year third quarter for the fixtures business was $9.5 million. For the nine months ended November 28, 2014, in addition to the impact on revenue from the sale of our fixtures business, revenue decreased due to a prior year contract to supply fixtures to a large consumer electronics company that did not recur in the current year. This contract, which was completed during the second quarter of the prior year, contributed approximately $26 million of revenue in the prior year. This decrease in revenue for the nine month period was partially offset by other fixtures business revenue growth prior to the sale.Strawberry Shortcake.

Segment earnings ~~decreased $0.6~~increased $0.4 million and ~~$15.4~~$56.7 million for the three and ~~nine~~six months ended ~~November~~August 28, ~~2014, respectively,~~2015 compared to the prior year periods. ~~This decrease~~The increase for the ~~nine~~six month period ended August 28, 2015 was primarily ~~driven~~due to the gain of $61.6 million recorded in the first quarter of the current year in connection with the sale of Strawberry Shortcake. This increase was partially offset by the operational impact to earnings from the sale of our display fixtures business ~~due to lower sales volume, unfavorable product mix~~ and ~~higher operating costs during the first half of the year. As~~Strawberry Shortcake as noted ~~above, the fixtures business was sold in the current year second quarter.~~above.

Centrally incurred and managed costs are not allocated back to the operating segments. The unallocated items include interest expense for centrally-incurred debt, domestic profit-sharing expense, ~~and for the nine months ended November 29, 2013, stock-based compensation expense. Unallocated items also included~~as well as costs associated with corporate operations such as the senior management, corporate finance, legal and insurance programs.


	Three Months Ended November						Nine months Ended November						Three Months Ended August						Six Months Ended August
(Dollars in thousands)	28, 2014			29, 2013			28, 2014			29, 2013			28, 2015			29, 2014			28, 2015			29, 2014
Interest expense	$	(9,533	)	$	(8,454	)	$	(27,782	)	$	(18,199	)	$	(6,486	)	$	(9,255	)	$	(14,599	)	$	(18,249	)
Profit-sharing expense		(2,041	)		(407	)		(7,509	)		(4,872	)		(1,675	)		(1,389	)		(3,350	)		(5,468	)
Stock-based compensation expense		—			—			—			(13,596	)
Corporate overhead expense		(6,335	)		(13,022	)		12,633			(40,877	)		393			26,662			(4,429	)		18,968

Total Unallocated	($	17,909	)	$	(21,883	)	$	(22,658	)	$	(77,544	)	$	(7,768	)	$	16,018		$	(22,378	)	$	(4,749	)

~~For~~Interest expense is lower in both the ~~nine months~~three and six month periods ended ~~November 29, 2013, stock-based compensation~~August 28, 2015 compared to the same periods in the ~~table above includes non-cash stock-based compensation~~ prior ~~to closing~~year. During the fourth quarter of 2015 and the first quarter of the ~~going private transaction~~current fiscal year, we made voluntary prepayments on our term loan facility of $140 million thus reducing interest expense.

Our profit-sharing plan includes a profit-sharing component and a 401(k) component. The 401(k) component is included in corporate overhead expense. While the ~~impact~~current year three and six month expense will vary from the prior year expense pattern, we expect the full year 2016 expense of the ~~settlement of stock options and the cancellation or modification of outstanding restricted stock units and performance shares concurrent~~combined components to be consistent with the closing of the going private transaction, a portion of which was non-cash. There is no stock-based compensation subsequent to the closing of the going private transaction as these plans were converted into cash compensation plans.

For the nine months ended November 28, 2014, “Corporate overhead expense” included the net gain on sale of AGI In-Store of $38.7 million. See Note 4, “Dispositions,” to the Consolidated Financial Statements for further information.prior year.

For both the three and ~~nine~~six month periods ended ~~November~~August 28, ~~2014,~~2015, “Corporate overhead expense” ~~included interest~~includes income of ~~$2.5~~$6.5 million ~~related~~from tax credits received from the State of Ohio under certain incentive programs made available to us in connection with our decision to maintain our world headquarters in the ~~Clinton Cards liquidation.~~state of Ohio. See Note 6, “Other Income and Expense,” to the Consolidated Financial Statements for further information.

During the ~~current~~prior year second quarter, we sold our world headquarters location and incurred a non-cash loss on disposal of $15.5 million, of which $2.2 million was recorded within the Unallocated segment. See Note 4, “Dispositions,” to the Consolidated Financial Statements for further information.

For both the ~~nine months~~three and six month periods ended ~~November~~August 29, ~~2013,~~2014, “Corporate overhead expense” included~~non-recurring~~ ~~costs related~~ the gain on sale of AGI In-Store of $38.8 million. See Note 4, “Dispositions,” to the going private transaction of approximately $17.4 million and a gain totaling $3.3 million related to a cash distribution received in connection with our minority investment in the common stock of Party City.Consolidated Financial Statements for further information.

The seasonal nature of our business precludes a useful comparison of the current period and the fiscal year-end financial statements; therefore, a Consolidated Statement of Financial Position as of ~~November~~August 29, ~~2013,~~2014, has been included.

Operating activities used ~~$77.1~~$65.5 million of cash during the ~~nine~~six months ended ~~November~~August 28, ~~2014,~~2015, compared to using ~~$33.1~~$28.3 million in the prior year period.

Accounts receivable used ~~$84.0~~$3.4 million of cash during the ~~nine~~six months ended ~~November~~August 28, ~~2014,~~2015, compared to ~~using $94.6~~providing $0.1 million of cash during the prior year period. The year-over-year ~~increase~~decrease in cash flow of ~~$10.6~~approximately $3 million occurred ~~primarily~~mainly within our North American Social Expression ~~segment~~Products and International Social Expression Products segments due primarily to the timing of collections from, or credits issued to, certain customers occurring in a different pattern in the current year period compared to the prior year period.

Inventory used ~~$57.8~~$49.9 million of cash during the ~~nine~~six months ended ~~November~~August 28, ~~2014,~~2015, compared to ~~using $43.6~~$76.6 million in the prior year ~~nine~~six months. Historically, the first ~~nine months~~half of our fiscal year is a period of inventory build, and thus a use of cash, in preparation for the fall and winter seasonal holidays. In the prior year, in addition to the normal seasonal inventory build, the ~~current year includes an~~ inventory increase related to a new party goods product launch and inventory growth in our Retail Operations segment to align inventory to more normalized ~~levels.~~

Other current assets used $0.2 million of cash during the nine months ended November 28, 2014, compared to providing $14.8 million during the prior year nine months. The variance between years is due to the changelevels, which was achieved and, as such, did not recur in the ~~balance of prepaid rents in our Retail Operations segment, primarily driven by year-over-year timing differences.~~current year.

Deferred costs -– net generally represents payments under agreements with retailers net of the related amortization of those payments. During the ~~nine~~six months ended ~~November~~August 28, ~~2014, payments exceeded amortization by $1.4 million. During the nine months ended November 29, 2013,~~2015, amortization exceeded payments by ~~$15.0~~$19.4 million. During the six months ended August 29, 2014, amortization exceeded payments by $22.0 million. See Note 10, “Deferred Costs,” to the Consolidated Financial Statements for further detail of deferred costs related to customer agreements.

Accounts payable and other liabilities used ~~$23.7~~$91.7 million of cash during the ~~nine~~six months ended ~~November~~August 28, ~~2014,~~2015, compared to using ~~$21.9~~$39.4 million in the prior year period. The year-over-year change in cash usage was attributable to higher variable compensation payments during the current year compared to the same period in the prior year and an increase in accounts payable payments due to normal year-over-year timing of business transactions, both of which were mainly in our North American Social Expression Products and Unallocated segments.

Investing activities provided ~~$39.1~~$91.4 million of cash during the ~~nine~~six months ended ~~November~~August 28, ~~2014,~~2015, compared to ~~using $26.6~~providing $47.8 million in the prior year period. The current year includes proceeds of $105.0 received from the sale of Strawberry Shortcake and proceeds of $24.1 million received from the surrender of certain corporate-owned life insurance policies. These cash inflows were partially offset by cash paid for capital expenditures of $31.7 million, cash paid for acquired character property rights of $2.8 million and a payment of $3.2 million related to the final working capital adjustments made in connection with the sale of AGI ~~In-Store~~In-Store.

The prior year cash provided was driven by the proceeds of $73.7 million from the sale of AGI In-store and $13.5 million from the sale of our current world ~~headquarters of $73.7 million and $13.5 million, respectively. See Note 4, “Dispositions,” to the Consolidated Financial Statements for further information.~~headquarters. In addition, the ~~current~~prior year includes proceeds received from H L & L Property Company, an indirect affiliate of American Greetings (“H L & L”) of $9.9 million related to the sale to H L & L by us of certain assets previously purchased by us related to the new world headquarters. ~~The current year also includes proceeds from Clinton Cards administration of $11.9 million.~~ Partially offsetting these cash inflows was cash paid for capital expenditures of ~~$70.3~~$50.2 million during the ~~current year nine month period.~~

~~In the~~ prior year period, the cash usage was primarily driven by $45.3 million of cash paid for capital expenditures. The prior year also included the receipt of a cash distribution of $12.1 million related to our investment in Party City.six month period.

Financing activities ~~provided $7.1~~used $34.0 million of cash during the current year ~~nine~~six months, compared to ~~using $11.5~~$38.7 million in the prior year ~~nine~~six month period. During the current year, this ~~source~~use of cash was primarily driven by a voluntary prepayment made on our term loan of $65 million and cash dividend payments of $20.7 million, partially offset by the additional borrowings, net of repayments, under our revolving credit facility ~~and accounts receivable securitization facility~~ of ~~$47.3~~$51.7 million. ~~Partially offsetting these~~

In the prior year this use of cash ~~inflows were~~was primarily driven by cash dividend payments of $24.2 ~~million and~~million. In addition, we made payments in the aggregate of ~~$15.0~~$10.0 million on our term ~~loan.~~

~~The primary~~loan and made repayments, net ~~use~~ of ~~cash in the prior year was in connection with activities related to the going private transaction. These activities included~~ borrowings, under our ~~new~~revolving credit ~~agreement, net~~facility of repayments and debt issuance costs, which provided cash of $348.8 million, the contribution from Century Intermediate Holding Company (“CIHC”), our parent and sole shareholder, which provided cash of $240.0 million and payment of cash of $568.3 million to complete the going private transaction and cancel outstanding shares. In addition, we paid cash dividends of $27.8 million, of which $9.6 million was paid to common shareholders prior to the going private transaction and $18.2 million was paid to CIHC after the going private transaction.$4.5 million.

Substantial credit sources are available to us. In total, we had available sources of credit of approximately ~~$625~~$485 million at ~~November~~August 28, ~~2014,~~2015, which included ~~$325~~$185 million outstanding on our term loan facility, a $250 million revolving credit facility and a $50 million accounts receivable securitization facility, of which ~~$220.5~~$217.6 million in the aggregate was unused as of ~~November~~August 28, ~~2014.~~2015. Borrowings under the accounts receivable securitization facility are limited based on our eligible receivables outstanding. At ~~November~~August 28, ~~2014,~~2015, we had ~~$48.0~~$56 million of borrowings outstanding under our revolving credit facility and we had ~~$3.8 million of~~no borrowings outstanding under our accounts receivable securitization facility. We had, in the aggregate, ~~$27.7~~$26.4 million outstanding under letters of credit, which reduced the total credit availability thereunder as of ~~November~~August 28, ~~2014.~~2015.

Please refer to the discussion of our borrowing arrangements as disclosed in the “Credit Sources” section under Part II, Item 7 of our Annual Report on Form 10-K for the year ended February 28, ~~2014~~2015 for further information.

At ~~November~~August 28, ~~2014,~~2015, we were in compliance with our financial covenants under the borrowing agreements described above.

On February 10, 2014, Century Intermediate Holding Company 2 (“CIHC2”), an indirect parent company of American Greetings Corporation, issued $285 million aggregate principal amount of 9.75%/10.50% Senior PIK Toggle Notes due 2019 (the “PIK Notes”). Excluding the first and last interest payment periods, which must be paid in cash, CIHC2 may elect to either accrue or pay cash interest on the PIK Notes. The PIK Notes carry a cash interest rate of 9.75%. Prior to the required semi-annual payment of interest by CIHC2 in August and February, it is expected that we will provide CIHC2 with the cash flow for ~~CHIC2~~CIHC2 to pay interest on the PIK Notes. Assuming interest is paid regularly in cash, rather than accrued, the annual cash required to pay the interest is expected to be approximately $27.8 million while the entire issuance of PIK Notes are outstanding. For further information, refer to the discussion of the PIK Notes as disclosed in “Transactions with Parent Companies and Other Affiliated Companies” in Note 18, “Related Party Information,” to the Consolidated Financial Statements under Part II, Item 8 of our Annual Report on Form 10-K for the fiscal year ended February 28, ~~2014.~~2015.

Throughout fiscal ~~2015~~2016 and thereafter, we will continue to consider all options for capital deployment including growth opportunities, acquisitions and other investments in third parties, expanding customer relationships, expenditures or investments related to our current product leadership initiatives or other future strategic initiatives, capital expenditures, the information technology systems refresh project, paying down debt, paying dividends and, as appropriate, preserving cash. Our future operating cash flow and borrowing availability under our credit agreement and our accounts receivable securitization facility are expected to meet these and other currently anticipated funding requirements. The seasonal nature of our business results in peak working capital requirements that may be financed through short-term borrowings when cash on hand is insufficient.

Over ~~roughly~~ the next ~~five or six~~several years, we expect to allocate resources, including capital, to refresh our information technology systems by modernizing our systems, redesigning and deploying new processes, and evolving new organization structures, all of which are intended to drive efficiencies within the business and add new capabilities. Amounts that we spend could be material in any fiscal year and over the life of the project. The total amount spent through fiscal ~~2014~~2015 on this project was approximately ~~$109~~$132 million. During the ~~nine~~six months ended ~~November~~August 28, ~~2014,~~2015, we spent approximately ~~$15~~$22 million, including capital of approximately ~~$11~~$18 million and expense of approximately $4 million, on these information technology systems. WeBased on the current scope of the project, we currently expect to spend ~~a total of at least~~

~~an additional $150~~approximately $170 million on these information technology systems over the remaining life of the project, the majority of which we expect will be capital expenditures. We believe these investments are important to our business, ~~helping~~help us drive further efficiencies and add new capabilities; however, there can be no assurance that we will not spend more or less than ~~$150~~$170 million over the remaining life of the project, or that we will achieve the anticipated efficiencies or any cost savings.

In May 2011, we announced plans to relocate our world headquarters to the Crocker Park mixed use development in Westlake, Ohio, which offers a vibrant urban setting, with retail stores and restaurants, offices and apartments. After

putting the project on hold pending the outcome of the going private transaction, we announced plans in October 2013 to resume the project and on March 26, 2014, we purchased the land on which the new world headquarters will be built. We are leasing a portion of the ~~real property~~Crocker Park Site to H L & L, which ~~will build the new world headquarters on the site. We have also entered into an operating lease with H L & L for the use of~~is constructing the new world headquarters building on the site and, when complete, will sublease the new world headquarters building back to us. In addition, to accommodate additional office needs, H L & L is constructing an additional approximately 60,000 square foot building adjacent to the world headquarters building and a surface parking lot on land that it is leasing from us. We have entered into operating leases to lease these buildings from H L & L, which ~~we expect~~are anticipated to be ~~ready~~available for occupancy in calendar year 2016. The initial lease ~~term is~~terms are fifteen years and will begin upon occupancy. The total annual rent is expected to be approximately ~~$9.5~~$10.6 million. Further details of the relocation undertaking are provided in Note 18, “Related Party Information,” to the Consolidated Financial Statements under Part II, Item 8 of our Annual Report on Form 10-K for the fiscal year ended February 28, ~~2014~~2015 and Note 17, “Related Party Information,” to the Consolidated Financial Statements of this Form 10-Q.

During the ~~nine months~~quarter ended ~~November~~August 28, 2015, we paid cash dividends in the aggregate amount of $20.7 million to CIHC, our parent and sole shareholder, $13.9 million of which was for the purpose of paying interest on the PIK Notes.

During the prior year quarter ended August 29, 2014, we paid cash dividends in the aggregate amount of $24.2 million to CIHC, our parent and sole shareholder, $14.3 million of which was for the purpose of paying interest on the PIK Notes. In addition, H L & L paid to us $9.9 million to acquire certain assets previously purchased by us related to the new world headquarters project.

In connection with the sale of AGI In-Store, effective August 29, 2014, we entered into a long-term supply agreement whereby we are committed to purchase a significant portion of our North American display fixtures requirements from Rock-Tenn Company. The supply agreement has an initial term of five years. The Corporation is committed to purchase $180 million of display fixture related products, accessories and/or services over the initial term of the agreement.

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. Please refer to the discussion of our Critical Accounting Policies under Part II, Item 7 of our Annual Report on Form 10-K for the year ended February 28, ~~2014.~~2015.

Certain statements in this report may constitute forward-looking statements within the meaning of the Federal securities laws. These statements can be identified by the fact that they do not relate strictly to historic or current facts. They use such words as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe” and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. These forward-looking statements are based on currently available information, but are subject to a variety of uncertainties, unknown risks and other factors concerning our operations and business environment, which are difficult to predict and may be beyond our control. Important factors that could cause actual results to differ materially from those suggested by these forward-looking statements, and that could adversely affect our future financial performance, include, but are not limited to, the following:

The risks and uncertainties identified above are not the only risks we face. Additional risks and uncertainties not presently known to us or that we believe to be immaterial also may adversely affect us. Should any known or unknown risks or uncertainties develop into actual events, or underlying assumptions prove inaccurate, these developments could have material adverse effects on our business, financial condition and results of operations. For further information concerning the risks we face and issues that could materially affect our financial performance related to forward-looking statements, refer to our periodic filings with the Securities and Exchange Commission, including the “Risk Factors” section included in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended February 28, ~~2014.~~2015.

For further information, refer to our Annual Report on Form 10-K for the year ended February 28, ~~2014.~~2015. There were no material changes in market risk, specifically interest rate and foreign currency exposure, for us from February 28, ~~2014,~~2015, the end of our preceding fiscal year, to ~~November~~August 28, ~~2014,~~2015, the end of our most recent fiscal quarter.

American Greetings maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its reports under the Securities Exchange Act of 1934, as amended, ~~(the “Exchange Act”),~~ is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to the Corporation’s management, including its Co-Chief Executive Officers and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

American Greetings carries out a variety of on-going procedures, under the supervision and with the participation of the Corporation’s management, including its Co-Chief Executive Officers and Chief Financial Officer, to evaluate the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures. Based ~~upon~~on the ~~procedures performed during~~foregoing, the ~~current fiscal quarter, our~~ Co-Chief Executive Officers and Chief Financial Officer of American Greetings concluded that ~~our~~the Corporation’s disclosure controls and procedures were ~~not~~ effective as of the end of the period covered by this ~~report because of the material weakness described below, which has not been remediated as of such date.~~

As previously reported in the “Controls and Procedures” section included in Part II, Item 9A of our Annual Report on Form 10-K for the fiscal year ended February 28, 2014, we identified a material weakness in internal control over financial reporting surrounding our accounting for income taxes. The principal factors contributing to the material weakness in accounting for income taxes were as follows:

In order to remediate this material weakness and further strengthen the overall controls surrounding our accounting for income taxes, the following steps have been or will be taken to improve the overall processes and controls in our tax function:

Specifically related to the preparation of the tax accounts for the quarters ended May 30, 2014, August 29, 2014 and November 28, 2014 and to ensure that the consolidated financial statements filed with those quarterly reports on Form 10-Q are presented fairly in accordance with U.S. generally accepted accounting principles, we utilized external resources and advisors as discussed above. In utilizing the external resources and advisors, we identified additional errors which were corrected during the quarter ended May 30, 2014. See Note 1, “Basis of Presentation,” to the Consolidated Financial Statements for further information.report.

We intend that the remediation of the material weakness related to controls over the accounting for income taxes will be completed as of the end of fiscal 2015, however, it will not be considered remediated until the remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. We cannot make any assurances that we will successfully remediate this material weakness within the anticipated timeframe and thus reduce to remote the likelihood that material misstatements concerning accounting for income taxes will not be prevented or detected in a timely manner.

~~Except for the remedial actions taken to date with respect to the material weakness described above, there~~There has been no change in the Corporation’s internal control over financial reporting during the Corporation’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

Al Smith et al. v. American Greetings Corporation.On June 4, 2014, Al Smith and Jeffrey Hourcade, former fixture installation crew members for special projects, individually and on behalf of those similarly situated, filed a putative class action lawsuit against American Greetings Corporation in the U.S. District Court for the Northern District of California, San Francisco Division. Plaintiffs claim that the Corporation ~~(1) failed to pay overtime wages and minimum wages in violation of~~violated certain rules under the Fair Labor Standards Act ~~(“FLSA”)~~ and California law, including the California Labor Code and Industrial Welfare Commission Wage Orders (“California Law”); (2) failed to make payments within the required time in violation of California Law; (3) failed to provide properly itemized wage statements in violation of the California law; and (4) engaged in unfair competition in violation of California’s Business and Professions Code. Plaintiffs claim to represent a class of all persons who, at any time since June 4, 2010, were employed by the Corporation in California as non-exempt employees and certify subclasses therein with respect to the California Law violations detailed above. In addition, plaintiffs claim to assert a nationwide collective action under the FLSA.Orders. For themselves and the proposed classes, plaintiffs seek an unspecified amount of general and special damages, including but not limited to minimum wages, agreed upon wages and overtime wages, statutory liquidated damages, statutory penalties (including penalties under the California Labor Code Private Attorney General Act of 2004 (“PAGA”), unpaid benefits, reasonable attorneys’ fees and costs, and ~~interest.~~interest). In addition, plaintiffs request disgorgement of all funds the Corporation acquired by means of any act or practice that constitutes unfair competition and restoration of such funds to the plaintiffs and the proposed classes.

The Corporation was served with the Complaint on July 16, 2014 and on July 31, 2014, the Corporation filed a Motion to Dismiss. On August 3, 2014, prior to the Court ruling on the defendant’s Motion to Dismiss, plaintiffs filed their First Amended Complaint. The Corporation vacated its Motion to Dismiss and filed its answer to the First Amended Complaint on August 21, 2014. On November 6, 2014, plaintiffs filed a Second Amended Complaint to add claims for reimbursement of business expenses and failure to provide meal periods in violation of California Law and on December 12, 2014, amended their PAGA notice to include the newly added claims.

On January 20, 2015, the parties reached a settlement in principle that, if approved by the Court, will fully and finally resolve the claims brought by Smith and Hourcade, as well as the classes they seek to represent. The settlement was a product of extensive negotiations and a private mediation, which was finalized and memorialized in a Stipulation and Class Action Settlement Agreement signed March 30, 2015. On March 31, 2015, plaintiffs filed a Motion for Preliminary Approval of Class Action Settlement and on July 23, 2015, the Court entered its Order Granting Preliminary Approval of Class Action Settlement.

Michael Ackerman v. American Greetings Corporation, et al. On March 6, 2015, plaintiff Michael Ackerman, individually and on behalf of others similarly situated, filed a putative class action lawsuit in the United States District Court of New Jersey alleging violation of the Telephone Consumer Protection Act (“TCPA”) by American Greetings Corporation and its subsidiary, AG Interactive, Inc. The plaintiff claims that defendants (1) sent plaintiff an unsolicited text message notifying plaintiff that he had received an ecard; and (2) knowingly and/or willfully violated the TCPA, which prohibits unsolicited automated or prerecorded telephone calls, including faxes and text messages, sent to cellular telephones. Plaintiff seeks to certify a nationwide class based on unsolicited text messages sent by defendants during the period February 8, 2011 through February 8, 2015. The plaintiff seeks damages in the statutory amount of $500 for each and every violation of the TCPA and $1,500 for each and every willful violation of the TCPA. We believe the plaintiff’s allegations in this lawsuit are without merit and intend to defend the action vigorously.

Management does not believe, based on currently available information, that the outcome of these proceedings will have a material adverse effect on the Corporation’s business, consolidated financial position or results of operations, although the outcomes could be material to the Corporation’s operating results for any particular period, depending, in part, upon the operating results for such period.

In addition to the foregoing, we are involved in various judicial, administrative, regulatory and arbitration proceedings concerning matters arising in the ordinary course of business operations, including, but not limited to, employment, commercial disputes and other contractual matters. We, however, do not believe that ~~based on currently available information~~ any of the other litigation in which we are currently engaged, either individually or in the aggregate, will have a material adverse effect on ~~the Corporation’s~~our business, consolidated financial ~~condition, although the outcome could be material to the Corporation’s operating~~position or results ~~for any particular period, depending, in part, upon the operating results for such period.~~of operations.

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


One American Road, Cleveland, Ohio		44144
(Address of principal executive offices)		(Zip Code)


	Page Number

					~~Page~~ ~~Number~~
PART I - FINANCIAL INFORMATION

	Item 1.		Financial Statements	3

	Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

	~~Item 3.~~		~~Quantitative and Qualitative Disclosures About Market Risk~~	33

	~~Item 4.~~		~~Controls and Procedures~~	3423

Item 3. Quantitative and Qualitative Disclosures About Market Risk		35

Item 4. Controls and Procedures		35

PART II - OTHER INFORMATION

	Item 1.		Legal Proceedings	36

	Item 6.		Exhibits	37

SIGNATURES		38

EXHIBITS


Exhibit Number		Description

~~10.1~~		~~Letter from American Greetings Corporation to Jeffrey Weiss, dated October 7, 2014 regarding Modification of Supplemental Executive Retirement Plan Benefit~~

~~31(a)~~ 31 (a)		Certification of ~~Co-Chief~~co-Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

~~31(b)~~ 31 (b)		Certification of ~~Co-Chief~~co-Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

~~31(c)~~ 31 (c)		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32		Certification of ~~Co-Chief~~co-Chief Executive Officers and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101		The following materials from the Corporation’s quarterly report on Form 10-Q for the quarter ended ~~November~~August 28, ~~2014,~~2015, formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Statement of Income for the quarters ended ~~November~~August 28, ~~2014,~~2015, and ~~November~~August 29, ~~2013,~~2014, (ii) Consolidated Statement of Comprehensive Income (Loss) for the quarters ended ~~November~~August 28, ~~2014,~~2015, and ~~November~~August 29, ~~2013,~~2014, (iii) Consolidated Statement of Financial Position at ~~November~~August 28, ~~2014,~~2015, February 28, ~~2014~~2015 and ~~November~~August 29, ~~2013,~~2014, (iv) Consolidated Statement of Cash Flows for the ~~nine~~six months ended ~~November~~August 28, ~~2014~~2015 and ~~November~~August 29, ~~2013~~2014 and (v) Notes to the Consolidated Financial Statements for the quarter ended ~~November~~August 28, ~~2014.~~

		2015.


AMERICAN GREETINGS CORPORATION

By:		/s/ Robert D. Tyler
		Robert D. Tyler
		Corporate Controller and
		Chief Accounting Officer *


(In thousands)	Foreign Currency Translation Adjustments			Pensions and Other Postretirement Benefits			Total
Balance at February 28, 2014	$	25,139		$	(24,387	)	$	752
Other comprehensive loss before reclassifications		(15,917	)		(158	)		(16,075	)
Amounts reclassified from accumulated other comprehensive income (loss)		—			445			445

Net current period other comprehensive (loss) income		(15,917	)		287			(15,630	)

Balance at November 28, 2014	$	9,222		$	(24,100	)	$	(14,878	)

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