##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended May 28, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission
file number 1-13859
 AMERICAN GREETINGS CORPORATION
  Ohio
    
    34-0065325(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 One American Road, Cleveland, Ohio
    
    44144(Address of principal executive offices)
    
    (Zip Code)
 (216) 252-7300
   þ o
  o o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
  o þ
  Class A Common
    
    37,092,043Class B Common
    
    2,925,689




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##### 



AMERICAN GREETINGS CORPORATION
INDEX
 PageNumberPART I  FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    3Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    15Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    23Item 4. Controls and Procedures
    
    
    23PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    24Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    25Item 6. Exhibits
    
    
    26SIGNATURES
    
    
    27EXHIBITSEX-2.1EX-10.1EX-10.2EX-10.3EX-10.4EX-10.5EX-31.AEX-31.BEX-32




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1.Financial Statements
 AMERICAN GREETINGS CORPORATION
CONSOLIDATED STATEMENT OF INCOME
 (Thousands of dollars except share and per share amounts)
 (Unaudited)Three Months EndedMay 28, 2010
    
    
    May 29, 2009Net sales
    
    $
    392,105
    
    
    $
    409,277Other revenue
    
    
    4,203
    
    
    
    3,645Total revenue
    
    
    396,308
    
    
    
    412,922Material, labor and other production costs
    
    
    158,013
    
    
    
    167,169Selling, distribution and marketing expenses
    
    
    117,551
    
    
    
    132,217Administrative and general expenses
    
    
    66,032
    
    
    
    63,151Other operating (income) expense  net
    
    
    (594
    )
    
    
    27,773Operating income
    
    
    55,306
    
    
    
    22,612Interest expense
    
    
    6,202
    
    
    
    6,987Interest income
    
    
    (213
    )
    
    
    (276
    )Other non-operating income  net
    
    
    (1,700
    )
    
    
    (1,042
    )Income before income tax expense
    
    
    51,017
    
    
    
    16,943Income tax expense
    
    
    20,178
    
    
    
    6,982Net income
    
    $
    30,839
    
    
    $
    9,961Earnings per share  basic
    
    $
    0.78
    
    
    $
    0.25Earnings per share  assuming dilution
    
    $
    0.75
    
    
    $
    0.25Average number of shares outstanding
    
    
    39,638,568
    
    
    
    39,608,947Average number of shares outstanding  assuming dilution
    
    
    40,849,429
    
    
    
    39,608,947Dividends declared per share
    
    $
    0.14
    
    
    $
    
  3




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##### Table of Contents



AMERICAN GREETINGS CORPORATION
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Thousands of dollars)
 (Unaudited)
    
    
    (Note 1)
    
    
    (Unaudited)May 28, 2010
    
    
    February 28, 2010
    
    
    May 29, 2009ASSETSCurrent assetsCash and cash equivalents
    
    $
    186,775
    
    
    $
    137,949
    
    
    $
    87,611Trade accounts receivable, net
    
    
    110,085
    
    
    
    135,758
    
    
    
    120,964Inventories
    
    
    157,913
    
    
    
    163,956
    
    
    
    172,977Deferred and refundable income taxes
    
    
    74,951
    
    
    
    78,433
    
    
    
    65,217Assets of businesses held for sale
    
    
    12,936
    
    
    
    13,280
    
    
    
    23,328Prepaid expenses and other
    
    
    118,047
    
    
    
    148,048
    
    
    
    157,471Total current assets
    
    
    660,707
    
    
    
    677,424
    
    
    
    627,568Goodwill
    
    
    30,238
    
    
    
    31,106
    
    
    
    25,921Other assets
    
    
    413,236
    
    
    
    428,160
    
    
    
    377,973Deferred and refundable income taxes
    
    
    150,207
    
    
    
    148,210
    
    
    
    172,672Property, plant and equipment  at cost
    
    
    839,928
    
    
    
    840,696
    
    
    
    856,723Less accumulated depreciation
    
    
    600,087
    
    
    
    595,945
    
    
    
    589,614Property, plant and equipment  net
    
    
    239,841
    
    
    
    244,751
    
    
    
    267,109$
    1,494,229
    
    
    $
    1,529,651
    
    
    $
    1,471,243LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesDebt due within one year
    
    $
    99,000
    
    
    $
    1,000
    
    
    $
    27,325Accounts payable
    
    
    80,205
    
    
    
    95,434
    
    
    
    85,483Accrued liabilities
    
    
    75,572
    
    
    
    79,478
    
    
    
    84,074Accrued compensation and benefits
    
    
    35,472
    
    
    
    85,092
    
    
    
    37,274Income taxes payable
    
    
    25,390
    
    
    
    13,901
    
    
    
    2,937Other current liabilities
    
    
    93,405
    
    
    
    97,138
    
    
    
    108,863Total current liabilities
    
    
    409,044
    
    
    
    372,043
    
    
    
    345,956Long-term debt
    
    
    230,973
    
    
    
    328,723
    
    
    
    409,455Other liabilities
    
    
    163,969
    
    
    
    164,642
    
    
    
    125,668Deferred income taxes and noncurrent income
taxes payable
    
    
    30,548
    
    
    
    28,179
    
    
    
    30,292Shareholders equityCommon shares  Class A
    
    
    37,064
    
    
    
    36,257
    
    
    
    35,921Common shares  Class B
    
    
    2,926
    
    
    
    3,223
    
    
    
    3,497Capital in excess of par value
    
    
    478,676
    
    
    
    461,076
    
    
    
    450,059Treasury stock
    
    
    (951,830
    )
    
    
    (946,724
    )
    
    
    (941,063
    )Accumulated other comprehensive loss
    
    
    (40,257
    )
    
    
    (29,815
    )
    
    
    (43,276
    )Retained earnings
    
    
    1,133,116
    
    
    
    1,112,047
    
    
    
    1,054,734Total shareholders equity
    
    
    659,695
    
    
    
    636,064
    
    
    
    559,872$
    1,494,229
    
    
    $
    1,529,651
    
    
    $
    1,471,243
  4




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AMERICAN GREETINGS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Thousands of dollars)
 (Unaudited)Three Months EndedMay 28, 2010
    
    
    May 29, 2009OPERATING ACTIVITIES:Net income
    
    $
    30,839
    
    
    $
    9,961Adjustments to reconcile net income to cash flows
from operating activities:Loss on disposition of retail stores
    
    
    
    
    
    
    28,333Net (gain) loss on disposal of fixed assets
    
    
    (151
    )
    
    
    199Depreciation and amortization
    
    
    10,294
    
    
    
    12,393Deferred income taxes
    
    
    (535
    )
    
    
    17,158Other non-cash charges
    
    
    3,385
    
    
    
    2,657Changes in operating assets and liabilities,
net of acquisitions and dispositions:Trade accounts receivable
    
    
    19,576
    
    
    
    (43,770
    )Inventories
    
    
    4,483
    
    
    
    11,926Other current assets
    
    
    (2,878
    )
    
    
    (1,243
    )Income taxes
    
    
    15,830
    
    
    
    (849
    )Deferred costs  net
    
    
    13,802
    
    
    
    (2,846
    )Accounts payable and other liabilities
    
    
    (66,362
    )
    
    
    (29,548
    )Other  net
    
    
    4,256
    
    
    
    4,358Total Cash Flows From Operating Activities
    
    
    32,539
    
    
    
    8,729INVESTING ACTIVITIES:Property, plant and equipment additions
    
    
    (5,965
    )
    
    
    (8,909
    )Cash payments for business acquisitions, net of cash acquired
    
    
    
    
    
    
    (16,286
    )Proceeds from sale of fixed assets
    
    
    555
    
    
    
    113Proceeds from escrow related to party goods transaction
    
    
    24,523
    
    
    
    Total Cash Flows From Investing Activities
    
    
    19,113
    
    
    
    (25,082
    )FINANCING ACTIVITIES:Net (decrease) increase in long-term debt
    
    
    (250
    )
    
    
    19,800Net increase in short-term debt
    
    
    
    
    
    
    26,325Sale of stock under benefit plans
    
    
    19,087
    
    
    
    30Purchase of treasury shares
    
    
    (12,979
    )
    
    
    (5,877
    )Dividends to shareholders
    
    
    (5,525
    )
    
    
    (4,865
    )Total Cash Flows From Financing Activities
    
    
    333
    
    
    
    35,413EFFECT OF EXCHANGE RATE CHANGES ON CASH
    
    
    (3,159
    )
    
    
    8,335INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    48,826
    
    
    
    27,395Cash and Cash Equivalents at Beginning of Year
    
    
    137,949
    
    
    
    60,216Cash and Cash Equivalents at End of Period
    
    $
    186,775
    
    
    $
    87,611
  5




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AMERICAN GREETINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 Three Months Ended May 28, 2010 and May 29, 2009
 Note 1  Basis of Presentation
      
    
    the investment in the equity of Schurman of $1.9 million;
    
    the limited guarantee of Schurmans indebtedness of $12 million and the limited bridge
guarantee of Schurmans indebtedness of $12 million, see Note 10 for further information;
    
    normal course of business trade accounts receivable due from Schurman, the balance of
which fluctuates throughout the year due to the seasonal nature of the business;
    
    the operating leases currently subleased to Schurman, the aggregate lease payments for
the remaining life of which was $46.3 million and $50.9 million as of May 28, 2010 and
February 28, 2010, respectively.
   6




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Note 2  Seasonal Nature of Business
  Note 3  Recent Accounting Pronouncements
   Note 4  Other Income and Expense
 Three Months Ended(In thousands)
    
    May 28, 2010
    
    
    May 29, 2009Loss on disposition of retail stores
    
    $
    
    
    
    $
    28,333Miscellaneous
    
    
    (594
    )
    
    
    (560
    )Other operating (income) expense  net
    
    $
    (594
    )
    
    $
    27,773
  Three Months Ended(In thousands)
    
    May 28, 2010
    
    
    May 29, 2009Foreign exchange gain
    
    $
    (1,053
    )
    
    $
    (579
    )Rental income
    
    
    (526
    )
    
    
    (423
    )Miscellaneous
    
    
    (121
    )
    
    
    (40
    )Other non-operating income  net
    
    $
    (1,700
    )
    
    $
    (1,042
    )
  7




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Note 5  Earnings Per Share
  Three Months EndedMay 28, 2010
    
    
    May 29, 2009Numerator (in thousands):Net income
    
    $
    30,839
    
    
    $
    9,961Denominator (in thousands):Weighted average shares outstanding
    
    
    39,639
    
    
    
    39,609Effect of dilutive securities:Stock options and other
    
    
    1,210
    
    
    
    Weighted average shares outstanding  assuming dilution
    
    
    40,849
    
    
    
    39,609Earnings per share
    
    $
    0.78
    
    
    $
    0.25Earnings per share  assuming dilution
    
    $
    0.75
    
    
    $
    0.25
   Note 6  Comprehensive Income
  Three Months Ended(In thousands)
    
    May 28, 2010
    
    
    May 29, 2009Net income
    
    $
    30,839
    
    
    $
    9,961Other comprehensive (loss) income:Foreign currency translation adjustments
    
    
    (8,998
    )
    
    
    24,938Pension and postretirement benefit adjustments, net of tax
    
    
    (1,445
    )
    
    
    (937
    )Unrealized gain on securities, net of tax
    
    
    1
    
    
    
    1Total comprehensive income
    
    $
    20,397
    
    
    $
    33,963
 Note 7  Customer Allowances and Discounts
  (In thousands)
    
    May 28, 2010
    
    
    February 28, 2010
    
    
    May 29, 2009Allowance for seasonal sales returns
    
    $
    38,019
    
    
    $
    36,443
    
    
    $
    41,275Allowance for outdated products
    
    
    8,118
    
    
    
    10,438
    
    
    
    16,948Allowance for doubtful accounts
    
    
    3,188
    
    
    
    2,963
    
    
    
    6,109Allowance for cooperative
advertising and marketing funds
    
    
    26,248
    
    
    
    24,061
    
    
    
    31,437Allowance for rebates
    
    
    24,318
    
    
    
    29,338
    
    
    
    37,965$
    99,891
    
    
    $
    103,243
    
    
    $
    133,734
 8




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Note 8  Inventories
 (In thousands)
    
    May 28, 2010
    
    
    February 28, 2010
    
    
    May 29, 2009Raw materials
    
    $
    19,287
    
    
    $
    18,609
    
    
    $
    19,912Work in process
    
    
    9,701
    
    
    
    6,622
    
    
    
    10,551Finished products
    
    
    185,097
    
    
    
    194,283
    
    
    
    207,799214,085
    
    
    
    219,514
    
    
    
    238,262Less LIFO reserve
    
    
    75,834
    
    
    
    75,491
    
    
    
    84,990138,251
    
    
    
    144,023
    
    
    
    153,272Display materials and factory supplies
    
    
    19,662
    
    
    
    19,933
    
    
    
    19,705$
    157,913
    
    
    $
    163,956
    
    
    $
    172,977
   Note 9  Deferred Costs
  (In thousands)
    
    May 28, 2010
    
    
    February 28, 2010
    
    
    May 29, 2009Prepaid expenses and other
    
    $
    75,198
    
    
    $
    82,914
    
    
    $
    99,888Other assets
    
    
    298,371
    
    
    
    310,555
    
    
    
    265,958Deferred cost assets
    
    
    373,569
    
    
    
    393,469
    
    
    
    365,846Other current liabilities
    
    
    (52,980
    )
    
    
    (53,701
    )
    
    
    (53,348
    )Other liabilities
    
    
    (47,298
    )
    
    
    (51,803
    )
    
    
    (2,825
    )Deferred cost liabilities
    
    
    (100,278
    )
    
    
    (105,504
    )
    
    
    (56,173
    )Net deferred costs
    
    $
    273,291
    
    
    $
    287,965
    
    
    $
    309,673
  Note 10  Debt
  9




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(In thousands)
    
    May 28, 2010
    
    
    February 28, 2010
    
    
    May 29, 2009Term loan facility
    
    $
    99,000
    
    
    $
    1,000
    
    
    $
    1,000Accounts receivable securitization facility
    
    
    
    
    
    
    
    
    
    
    26,325$
    99,000
    
    
    $
    1,000
    
    
    $
    27,325
  (In thousands)
    
    May 28, 2010
    
    
    February 28, 2010
    
    
    May 29, 20097.375% senior notes, due 2016
    
    $
    212,386
    
    
    $
    212,184
    
    
    $
    211,6157.375% notes, due 2016
    
    
    18,404
    
    
    
    18,103
    
    
    
    17,256Term loan facility
    
    
    
    
    
    
    98,250
    
    
    
    99,000Revolving credit facility, due 2011
    
    
    
    
    
    
    
    
    
    
    81,4006.10% senior notes, due 2028
    
    
    181
    
    
    
    181
    
    
    
    181Other
    
    
    2
    
    
    
    5
    
    
    
    3$
    230,973
    
    
    $
    328,723
    
    
    $
    409,455
     Guarantees
   10




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Note 11  Retirement Benefits
  Defined Benefit Pension
    
    
    Postretirement BenefitThree Months Ended
    
    
    Three Months Ended(In thousands)
    
    May 28, 2010
    
    
    May 29, 2009
    
    
    May 28, 2010
    
    
    May 29, 2009Service cost
    
    $
    251
    
    
    $
    190
    
    
    $
    575
    
    
    $
    650Interest cost
    
    
    2,213
    
    
    
    2,246
    
    
    
    1,550
    
    
    
    1,975Expected return on plan assets
    
    
    (1,660
    )
    
    
    (1,378
    )
    
    
    (1,125
    )
    
    
    (1,025
    )Amortization of prior service
cost (credit)
    
    
    44
    
    
    
    67
    
    
    
    (1,850
    )
    
    
    (1,850
    )Amortization of actuarial loss
    
    
    526
    
    
    
    455
    
    
    
    250
    
    
    
    750$
    1,374
    
    
    $
    1,580
    
    
    $
    (600
    )
    
    $
    500
   Note 12  Fair Value Measurements
   
    
    Level 1  Valuation is based upon quoted prices (unadjusted) in active markets for
identical assets or liabilities.
    
    Level 2  Valuation is based upon quoted prices for similar assets and liabilities in
active markets, or other inputs that are observable for the asset or liability, either
directly or indirectly, for substantially the full term of the financial instrument.
 11




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
    
    Level 3  Valuation is based upon unobservable inputs that are significant to the fair
value measurement.
  Quoted prices
    
    
    Quoted pricesin active
    
    
    in activeBalance
    
    
    markets for
    
    
    markets for
    
    
    Significantas of
    
    
    identical assets
    
    
    similar assets
    
    
    unobservableMay 28,
    
    
    and liabilities
    
    
    and liabilities
    
    
    inputs2010
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Assets measured on a recurring basis:Active employees medical plan trust
assets
    
    $
    4,025
    
    
    $
    4,025
    
    
    $
    
    
    
    $
    Deferred compensation plan assets (1)
    
    
    5,963
    
    
    
    5,963
    
    
    
    
    
    
    
    Total
    
    $
    9,988
    
    
    $
    9,988
    
    
    $
    
    
    
    $
    Assets measured on a non-recurring basis:Assets held for sale
    
    $
    5,557
    
    
    $
    
    
    
    $
    5,557
    
    
    $
    Total
    
    $
    5,557
    
    
    $
    
    
    
    $
    5,557
    
    
    $
    
 
 (1)
    
    There is an offsetting liability for the obligation to its employees on the
Corporations books.    Note 13  Income Taxes
   12




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Note 14  Business Segment Information
 Total Revenue
    
    
    Segment Earnings (Loss)Three Months Ended
    
    
    Three Months Ended(In thousands)
    
    May 28, 2010
    
    
    May 29, 2009
    
    
    May 28, 2010
    
    
    May 29, 2009North American Social
Expression Products
    
    $
    304,168
    
    
    $
    323,813
    
    
    $
    68,107
    
    
    $
    77,986Intersegment items
    
    
    
    
    
    
    (5,104
    )
    
    
    
    
    
    
    (3,511
    )Exchange rate adjustment
    
    
    4,141
    
    
    
    370
    
    
    
    1,942
    
    
    
    81Net
    
    
    308,309
    
    
    
    319,079
    
    
    
    70,049
    
    
    
    74,556International Social
Expression Products
    
    
    57,801
    
    
    
    56,051
    
    
    
    2,834
    
    
    
    513Exchange rate adjustment
    
    
    (228
    )
    
    
    (3,289
    )
    
    
    
    
    
    
    (174
    )Net
    
    
    57,573
    
    
    
    52,762
    
    
    
    2,834
    
    
    
    339Retail Operations
    
    
    
    
    
    
    11,727
    
    
    
    
    
    
    
    (34,830
    )Exchange rate adjustment
    
    
    
    
    
    
    112
    
    
    
    
    
    
    
    (285
    )Net
    
    
    
    
    
    
    11,839
    
    
    
    
    
    
    
    (35,115
    )AG Interactive
    
    
    18,666
    
    
    
    18,949
    
    
    
    2,474
    
    
    
    1,796Exchange rate adjustment
    
    
    (112
    )
    
    
    (104
    )
    
    
    (102
    )
    
    
    (82
    )Net
    
    
    18,554
    
    
    
    18,845
    
    
    
    2,372
    
    
    
    1,714Non-reportable segments
    
    
    11,872
    
    
    
    10,397
    
    
    
    2,152
    
    
    
    (129
    )Unallocated
    
    
    
    
    
    
    
    
    
    
    (26,399
    )
    
    
    (24,852
    )Exchange rate adjustment
    
    
    
    
    
    
    
    
    
    
    9
    
    
    
    430Net
    
    
    
    
    
    
    
    
    
    
    (26,390
    )
    
    
    (24,422
    )$
    396,308
    
    
    $
    412,922
    
    
    $
    51,017
    
    
    $
    16,943
 13




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##### Table of Contents



Termination Benefits
   Deferred Revenue
  Note 15  Subsequent Event
     14




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##### Table of Contents



Item 2.  Managements Discussion and Analysis of Financial Condition and Results of
Operations
  Overview
     15




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##### Table of Contents



Results of Operations
 Three months ended May 28, 2010 and May 29, 2009
   (Dollars in thousands)
    
    2010
    
    

% Total Revenue
    
    
    2009
    
    

% Total RevenueNet sales
    
    $
    392,105
    
    
    
    98.9
    %
    
    $
    409,277
    
    
    
    99.1
    %Other revenue
    
    
    4,203
    
    
    
    1.1
    %
    
    
    3,645
    
    
    
    0.9
    %Total revenue
    
    
    396,308
    
    
    
    100.0
    %
    
    
    412,922
    
    
    
    100.0
    %Material, labor and other production costs
    
    
    158,013
    
    
    
    39.9
    %
    
    
    167,169
    
    
    
    40.5
    %Selling, distribution and marketing expenses
    
    
    117,551
    
    
    
    29.6
    %
    
    
    132,217
    
    
    
    32.0
    %Administrative and general expenses
    
    
    66,032
    
    
    
    16.7
    %
    
    
    63,151
    
    
    
    15.3
    %Other operating (income) expense  net
    
    
    (594
    )
    
    
    (0.2
    %)
    
    
    27,773
    
    
    
    6.7
    %Operating income
    
    
    55,306
    
    
    
    14.0
    %
    
    
    22,612
    
    
    
    5.5
    %Interest expense
    
    
    6,202
    
    
    
    1.6
    %
    
    
    6,987
    
    
    
    1.7
    %Interest income
    
    
    (213
    )
    
    
    (0.1
    %)
    
    
    (276
    )
    
    
    (0.1
    %)Other non-operating income  net
    
    
    (1,700
    )
    
    
    (0.4
    %)
    
    
    (1,042
    )
    
    
    (0.2
    %)Income before income tax expense
    
    
    51,017
    
    
    
    12.9
    %
    
    
    16,943
    
    
    
    4.1
    %Income tax expense
    
    
    20,178
    
    
    
    5.1
    %
    
    
    6,982
    
    
    
    1.7
    %Net income
    
    $
    30,839
    
    
    
    7.8
    %
    
    $
    9,961
    
    
    
    2.4
    %
      16




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##### Table of Contents



Wholesale Unit and Pricing Analysis for Greeting Cards
  (Decrease) Increase From the Prior YearEveryday Cards
    
    
    Seasonal Cards
    
    
    Total Greeting Cards2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Unit volume
    
    
    (1.7
    %)
    
    
    4.6
    %
    
    
    (6.0
    %)
    
    
    3.1
    %
    
    
    (3.3
    %)
    
    
    4.0
    %Selling prices
    
    
    1.7
    %
    
    
    2.2
    %
    
    
    4.0
    %
    
    
    1.7
    %
    
    
    2.5
    %
    
    
    2.0
    %Overall (decrease) / increase
    
    
    (0.1
    %)
    
    
    6.9
    %
    
    
    (2.3
    %)
    
    
    4.9
    %
    
    
    (0.9
    %)
    
    
    6.1
    %
    Expense Overview
    17




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##### Table of Contents



Segment Information
   North American Social Expression Products Segment
 Three Months Ended(Dollars in thousands)
    
    May 28, 2010
    
    
    May 29, 2009
    
    
    % ChangeTotal revenue
    
    $
    304,168
    
    
    $
    318,709
    
    
    
    (4.6
    %)Segment earnings
    
    
    68,107
    
    
    
    74,475
    
    
    
    (8.6
    %)
  18




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##### Table of Contents



International Social Expression Products Segment
 Three Months Ended(Dollars in thousands)
    
    May 28, 2010
    
    
    May 29, 2009
    
    

% ChangeTotal revenue
    
    $
    57,801
    
    
    $
    56,051
    
    
    
    3.1
    %Segment earnings
    
    
    2,834
    
    
    
    513
    
    
    
    452.4
    %
   Retail Operations Segment
 Three Months Ended(Dollars in thousands)
    
    May 28, 2010
    
    
    May 29, 2009
    
    

% ChangeTotal revenue
    
    $
    
    
    
    $
    11,727
    
    
    
    (100.0
    %)Segment loss
    
    
    
    
    
    
    (34,830
    )
    
    
    100.0
    %
  AG Interactive Segment
 Three Months Ended(Dollars in thousands)
    
    May 28, 2010
    
    
    May 29, 2009
    
    

%ChangeTotal revenue
    
    $
    18,666
    
    
    $
    18,949
    
    
    
    (1.5
    %)Segment earnings
    
    
    2,474
    
    
    
    1,796
    
    
    
    37.8
    %
   19




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##### Table of Contents



Liquidity and Capital Resources
  Operating Activities
      Investing Activities
   Financing Activities
  20




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##### Table of Contents



Credit Sources
       21




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Critical Accounting Policies
  Factors That May Affect Future Results
  
    
    a weak retail environment and general economic conditions;
    
    the ability to achieve both the desired benefits from the party goods transaction
as well as ensuring a seamless transition for affected retail customers and
consumers;
    
    our successful transition of the Retail Operations segment to its buyer, Schurman,
and Schurmans ability to successfully operate its retail operations and satisfy its
obligations to us;
    
    the ability to successfully integrate both RPG and Papyrus;
    
    retail consolidations, acquisitions and bankruptcies, including the possibility of
resulting adverse changes to retail contract terms;
    
    the ability to achieve the desired benefits associated with our cost reduction
efforts;
    
    competitive terms of sale offered to customers;
    
    the ability to comply with our debt covenants;
    
    the timing and impact of investments in retail customers or new product strategies
as well as new product introductions and achieving the desired benefits from those
investments;
    
    consumer acceptance of products as priced and marketed;
 22




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##### Table of Contents




    
    the impact of technology on core product sales;
    
    the timing and impact of converting customers to a scan-based trading model;
    
    escalation in the cost of providing employee health care;
    
    the ability to successfully implement, or achieve the desired benefits associated
with, any information systems refresh that we may implement;
    
    the ability to achieve the desired accretive effect from any share repurchase
programs;
    
    fluctuations in the value of currencies in major areas where we operate, including
the U.S. Dollar, Euro, U.K. Pound Sterling and Canadian Dollar; and
    
    the outcome of any legal claims known or unknown.
   
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
    23




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
 Electrical Workers Pension Fund, Local 103, I.B.E.W. Litigation
 Cookie Jar/MoonScoop Litigation .
   24




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##### Table of Contents



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 (a)
    
    Not applicable.(b)
    
    Not applicable.(c)
    
    The following table provides information with respect to our purchases of our common shares
during the three months ended May 28, 2010.
 Maximum Number ofShares (orTotal Number of
    
    Approximate DollarShares Purchased as
    
    Value) that May YetTotal Number of

    
    Average Price Paid
    
    Part of Publicly
    
    Be Purchased UnderPeriod
    

Shares Repurchased

    
    per Share
    
    Announced Plans
    
    the PlansMarch 2010
    
    Class A 
- (2)
    
    
    
    
    
    
    
    $
    46,578,874Class B  16,007
(1)
    
    $
    19.00
    
    
    April 2010
    
    Class A 
- (2)
    
    
    
    
    
    
    
    $
    46,578,874Class B  34,758
(1)
    
    $
    25.01
    
    
    May 2010
    
    Class A 
- (2)
    
    
    
    
    
    
    
    $
    46,578,874Class B  458,945
(1)
    
    $
    25.18
    
    
    Total
    
    Class A 
- (2)
    
    
    
    
    
    Class B  509,710
(1)
    
    
    
    
    
    
 
 (1)
    
    There is no public market for the Class B common shares of the Corporation. Pursuant to our
Articles of Incorporation, a holder of Class B common shares may not transfer such Class B
common shares (except to permitted transferees, a group that generally includes members of the
holders extended family, family trusts and charities) unless such holder first offers such
shares to the Corporation for purchase at the most recent closing price for the Corporations
Class A common shares. If the Corporation does not purchase such Class B common shares, the
holder must convert such shares, on a share for share basis, into Class A common shares prior
to any transfer. It is the Corporations general policy to repurchase Class B common shares,
in accordance with the terms set forth in our Amended and Restated Articles of Incorporation,
whenever they are offered by a holder, unless such repurchase is not otherwise permitted under
agreements to which the Corporation is a party. All of the shares were repurchased by
American Greetings for cash pursuant to this right of first refusal.(2)
    
    On January 13, 2009, American Greetings announced that its Board of Directors authorized a
program to repurchase up to $75 million of its Class A common shares. There is no set
expiration date for this repurchase program. No repurchases were made in the current quarter
under this program. 25




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##### Table of Contents



Item 6. Exhibits
  ExhibitNumber
    
    Description2.1
    
    Settlement Agreement, dated as of May 7, 2010, by and among
American Greetings Corporation, Those Characters from Cleveland,
Inc., Cookie Jar Entertainment, Inc., Cookie Jar Entertainment
(USA), Inc. and Cookie Jar Entertainment Holdings (USA) Inc.,
amending that certain Binding Letter Agreement, dated July 20,
2008, between Cookie Jar Entertainment Inc. and American Greetings Corporation
(confidential treatment requested as to certain portions which are
omitted and filed separately with the SEC).10.1
    
    Amended and Restated Credit Agreement, dated as of June 11, 2010,
among American Greetings Corporation, various lending institutions
party thereto, PNC Bank, National Association, as the Global
Administrative Agent, as the Swing Line Lender, a LC Issuer and
the Collateral Agent, JPMorgan Chase Bank, N.A. and Bank of
America, N.A., as Co-Syndication Agents, KeyBank National
Association and The Bank of Nova Scotia as Co-documentation
Agents, and PNC Capital Markets LLC, as the Lead Arranger and Sole
Bookrunner.10.2
    
    Amended and Restated Pledge and Security Agreement, dated as of
June 11, 2010, by and among, American Greetings Corporation, each
of the domestic subsidiaries of American Greetings Corporation
identified therein and PNC Bank, National Association, as
collateral agent.10.3
    
    Amended and Restated Guaranty of Payment of Debt, dated as of June
11, 2010 by and among each of the domestic subsidiaries of
American Greetings Corporation identified therein, and PNC Bank,
National Association as global administrative agent.10.4
    
    Key Management Annual Incentive
Plan (Fiscal Year 2011 Description).10.5
    
    Description of Non-Employee
Director Compensation.(31) a
    
    Certification of Chief Executive Officer Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.(31) b
    
    Certification of Chief Financial Officer Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.(32)
    
    Certification of Chief Executive Officer and Chief Financial
Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
 26




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##### Table of Contents



AMERICAN GREETINGS CORPORATIONBy:
    /s/ Joseph B. CipolloneJoseph B. CipolloneVice President, Corporate
Controller, and Chief Accounting
Officer  *  
 *
    
    (Signing on behalf of Registrant as a duly authorized officer of the Registrant and signing as
the chief accounting officer of the Registrant.) 27