Good day and welcome to the American Greetings third quarter 2008 earningsconference call. (Operator Instructions)I would like to turn the call over to Mr. Greg Steinberg. Please go ahead sir.

Good morning everyone and welcome to our third quarterconference call. I’m Greg Steinberg thecompany’s treasurer and joining metoday on the call areZev Weiss our CEO and Seven Smith or CFO. We released our earnings for thethird quarter fiscal 2008 this morning. If you do notyet have our third quarter press release you can find acopy within theinvestor’s section of theAmerican Greetings website atinvenstors.americangreetings.com. As you may expect some of our comments today includestatements about projections for the future. Those projections involve risks and uncertainties that could causeactual results to differ materially from the forward-looking statements. We cannot guarantee the accuracy of anyforecasts or estimates and we do not plan to update any forward-lookingstatements. If you would like moreinformation on our risk involved in forward-looking statements please see ourannual report or our SEC filings. Previous earnings releases as well as our 10Qs, 10Ks and annual reportare available on the investor section of the American Greetings website. We will now proceed with comments from both our CEO and CFOfollowed by aquestion-and-answer session. Zev?

Good morning everyone. I am pleased to share with you today our fiscal 2008 third quarterresults. During the third quarter wecontinued to see improved performance at retail as a result of our cardinitiatives. We realized improved grossmargins as we continued to effectively manage our supply chain costs and weannounced two acquisitions in the digital photo space. I will comment on three broad topics today. Our strategic card initiatives, our capitaldeployment including our recently announced acquisitions and our full yearoutlook. I am pleased with our cardperformance in North America this quarter. The positive performance we experiencedduring the first half of this year has continued into our third quarter in manyof the doors that we reset over the past 18 months. The consumers and the retailers response toour strategic card initiatives was strong during the first half of the year andcontinues to be positive. I am pleasedwith the overall feedback we have received as many of the retailers have beendelighted by the improved product appeal and consumers are responding aswell. We continue tracking towards thereturn hurdles we had hoped for and each successive quarter showing improvementin consumer response. Our ongoing consumer research continues to provide us withinsights that are being reflected in our products. While consumer based research is not newwe’ve pushed the application of the research to the next level. We’ve dug deeper, conducting additional testing,looked at generational shopping habits and examined the overall card shoppingexperience. Now, key learning’s and bestpractices are being integrated into our product lines and being delivered toour customers through their retail experience. To give you an example of how this consumer based researchis being delivered at retail let me explain how we are adjusting just one lineof cards; humor cards. Funny cardscontinue to be a staple in our card line. Our newest cards reflect photo humor,…

Today I will have three sections to my preparedremarks. First, a few comments on ourconsolidated revenues. Second, a briefreview of our business segments. Third,a walk through of some key components of our financials for the third fiscalquarter. We will then open up the linefor questions. Our reported revenues were down $35 million from last yearsthird quarter or 6.8%. Revenuesbenefited from both foreign exchange and lower spending on our strategic cardinitiatives. These benefits were almostcompletely offset but a loss of revenue due to the candle product linedivestiture last year. The revenuebenefit from exchange was $13 million over the prior year’s third quarter. We also had a $3 million benefit versus theprior year as our strategic card and scanned based training initiatives hadless activity than last y ear’s third quarter. However the candle product line divestiture reduced our sales to $14million versus last year. These threeitems when netted together increased revenues by $2 million. So, cutting through all the noise and holdingaside foreign exchange, differences in initiative timing and the effect ofdivestitures our revenues were down $37 million compared to the prior year’sthird quarter or about 7%. Moving to our segments the North American social expressionsegment revenues were down $37 million versus the prior year’s thirdquarter. About $14 million of that 37 or40% of the lower revenue was the result of the candle product linedivestiture. Holding aside thisstrategic decision this segment’s revenues were down $23 million or 7%. Of the $23 million $20 million relates to twoproduct lines where we are sacrificing low margin revenue in order to increasereturns. I will speak to this trade offin just a moment. The remaining $3million in revenue decline was caused by roughly $6 million related to timingof terms with a retail partner partially offset by $3 million of benefit oflower spending on strategic card initiatives.…

(Operator Instructions) Well go first to Jeff Stein with KeyBanc Capital Markets. Jeffrey S. Stein –KeyBanc Capital Markets: First, it sounds to me like the potential swing factor inthe fourth quarter is more expense related than revenue related. Would that be correct?

There clearly is on the revenue side the seasonal componentfor both Christmas and Valentines Day affect us. But, I think if you just looked at the bottomline impact of both I think I would agree with that. Not having looked through the numbers, Ithink that sounds right. Jeffrey S. Stein –KeyBanc Capital Markets: Can you just quantify the aggregated amount of scanned basedtrading activity that you would expect to occur in the fourth quarter thatwould potentially swing or hold between fourth quarter or first quarter.

While we don’t forecast specific line items let me aggregatescanned based trading and our card initiative together and for that you wouldsee that we have spent year-to-date in the order of magnitude around $19million. What we’ve said for the year isthat we could spend $36 to up to the high 40s in expense for the year. So, all of that roughly $20, $25 to $30million would occur in the fourth fiscal quarter. Jeffrey S. Stein –KeyBanc Capital Markets: You talked about the fact that you’re continuing to see goodresults in the reset doors. I’m wonderinggiven all the noise that’s going on with currency, with switch to scanned basedtrading and all and lost doors year-over-year, on a comp store basis what kindof performance are you seeing in the reset doors relative to let’s saynon-reset doors?

I’m not going to get into all the details of that. I can tell you that in general the trendsthat we had been seeing which were positive trends have continued and so we’vebeen very pleased with it. Jeffrey S. Stein –KeyBanc Capital Markets: Does this have any implications for spending on strategiccard initiatives for next year?

I would expect that there would be some spending but, we’restill working through our plans for next year and we’re still trying to ironout all the details to see exactly what we’re going to do. Jeffrey S. Stein –KeyBanc Capital Markets: I know you’re not quite ready yet to comment on the impactthat you might incur for integrated WebShops and PhotoWorks but would you putthat number in the material range?

For the fourth quarter we could tell you that we expect itto be a few pennies of drag on earnings. I’m not sure if you would consider that material or not. In the next fiscal year because we haven’tyet closed on the PhotoWorks transaction as you know we’re going through atender offer process. We would yet knowwhat the total impact both acquisitions will be next fiscal year. As we get into – as we close that transactionhopefully in late January then we’ll offer more guidance on that specificbusiness area in April.

(Operator Instructions) We’ll go next to Kathleen Reed with Stanford Financial. Kathleen Reed –Stanford Financial: Can you give us an overall qualifications statement to whatyou’re seeing in terms of the holiday season so far? How it compares to prior years? If there are other trends other than theprevalence of gift cards that you’re really seeing? If you’re seeing increased traffic across thenation? Just some morequalification. It’s kind of confusingmessages we’re hearing from some other companies.

Obviously we hear a lot of the same things that you hearthat’s being reported publicly. Giventhat there’s so much that happens at the end of the holiday and it’s literallyhappening day-by-day as we speak I just would prefer not to comment on it atall. We’ll hear more about it when weget together again for the next call. Ijust think there’s so much – as you know the holiday’s been happening later andlater every year and it really does come down to that last three to 10days. Kathleen Reed –Stanford Financial: With that said can you give us any – on your third quarterthen just how actual cards did seasonal versus everyday? Were seasonal cards down year-over-year? What kind of growth are we seeing in cards?

We can speak to some of the data. As you know we generally generate thatinformation for the Q which comes out for us right at the beginning of the newcalendar year. So while we’re stillcrunching some of the details behind it I would share that the seasonal cardsand everyday cards were very close to our plan and the plan was for them to beroughly at flat for this quarter, third quarter. Kathleen Reed –Stanford Financial: So, flat year-over-year?

Correct. Kathleen Reed –Stanford Financial: I think when you were going through your comments just interms of your gross margin improvement in the quarter you said that lower saleshelped you with that. Did I hear thatright?

Lower revenues were about two thirds of the reason for thelower MLOPC in the quarter. Kathleen Reed –Stanford Financial: On a dollar basis?

On a dollar basis. Kathleen Reed –Stanford Financial: So, on the gross margin improvement though?

Right. So, of the 100basis point improvement 60 basis points is related to lower revenues. 50 was related to the improved quality or mixas I called it and then that ends to 110 and the other 10 basis point offsetwas foreign exchange. Kathleen Reed –Stanford Financial: I’ll ask that question a different way later. Zev, when you were speaking about thepositive trends you were seeing from the card program that you were – I thinkyou said they were either meeting your hurdle or getting towards yourhurdle. Are we seeing actually somepositive pricing trends from that card program?

The first year that we did the roll out just because the waythe cards mixed in the everyday section it wasn’t that we intended necessarilyto drive pricing but some of the mix drove pricing. This year as we’ve comped that we’re on thesecond year of it – its much more unit based than it is pricing based. Kathleen Reed –Stanford Financial: Just to again clarify the fact that your guidance may comein at the high end of your guidance. Didyou say that if spending on the scanned based trading gets rolled into thefirst quarter of 09 you would be higher than your $1.55? Or, that would be one of the reasons why youwould come in at the higher end of the $1.35 to $1.55?

I would say yes to those two parts of your question. Yes, the SBT to the extend it rolls into thefourth quarter will cause us to have less spending and therefore have us higherin the fourth quarter and that is the reason we would be at the higherend. Kathleen Reed –Stanford Financial: On the segment results the interactive segment I thought wehad anniversary’d the divestiture of the shut down of the ring tone businessback in the summer. So, I’m a little bitconfused why that’s still a drag.

The wind down of the ring tones business happened over acouple quarter periods so it was actually spread primarily across the third andfourth quarter a year ago. So, some ofit was anniversary’d – there’s pieces of it in the second quarter and as wewent through processes to shut down offices and some of those operations it wasspread out over a couple of quarter periods.

Are we done with that now?

At the end of this fiscal year we’ll have fully lapped itfrom last year. Kathleen Reed –Stanford Financial: So even fourth quarter will the problem.

I would expect it to be smaller in the fourth quarter.

(Operator Instructions) We’ll go to Brian Delaney with EnTrust. Brian M. Delaney –EnTrust Capital: I’m sorry if I missed it. In the other non-operating income line the $4.5 million what was thatagain?

That’s foreign exchange. Brian M. Delaney –EnTrust Capital: All of it is in there because the foreign – that’s the totalnet impact of it?

Well, the foreign exchange that is in that line item is $4.5million. The next effect for us acrossthe entire P&L spectrum is a net effect to us of $2.7 million positiveEBITDA.

We’ll go next to Dax Vlassis with Gates Capital Management.

I was wondering what percentage of the business is currentlybased on scanned based trading for the segments it’s applicable to?

It’s still under a third.

Under a third. Howdoes that compare to let’s say a year or two years ago?

It’s creeping up Dax in the neighborhood of three to fourpercentage points per year if you look out over the last few years. But, it’s very much lumpy in that some ofthese contracts get signed occur within a quarter and you see a step up whereall three or four percentage points might occur in that particular quarter.

Where do you expect that to go with the current plans thatyou have for scanned based trading?

It’s very difficult to predict something like that becausethis is sort of one component of an overall negotiation and it’s difficult tosay how that’s going to play out. Soeven on say a short term basis let’s say a 12 month period it’s very hard tosay exactly how that will play out. Ican’t give you an exact number on it. There’s lots of different scenarios but it depends on how things playout.

What about your cap ex ongoing? I know you’re going to spend $55 to $60 wouldyou expect a similar number next year and the year after that?

We haven’t forecast next year yet Dax. Historically we’ve been running in that rangebut as we mentioned in the last two calls we anticipate incremental spending onsystem refresh and we haven’t yet shared how much that could be for next fiscalyear.

I’m just saying if I’m looking going forward would youexpect the next few years to be above $60 million?

Again, we haven’t forecast out the next few years publicly. In April we may do that.

Did you say your comps for retail were up 4.6?

Yes we did.

Is WebShops profitable?

The business in this quarter had less than a $1 million dragon EBITDA so no it was not.

I just mean the business that you bought at it stands was itprofitable?

It’s slightly negative on a consolidated basisannually.

Just so I understand the scanned based trading. For this quarter did I hear it right it wasapproximately $8 million?

For this quarter, yes $8 million on the pre-tax line.

For strategic card or just scanned based trading?

A combination of both was $8 million roughly split equallyfor the quarter.

For the full year you’d expect to spend somewhere, ifeverything goes as planned, around high 40s?

It will be in a band because we’re not sure which contractscould be executed from a technical perspective so it will be a band from the low30s to the high 40s maybe a tad above.

Would most of the incremental spending be in scanned basedtrading in the fourth quarter?

Yes.

Would you expect that to be 50/50 at year end if everythinggoes as planned?

50/50 between the card initiative and the scanned basedtrading? No. It will be more heavily weighted toward thescanned based trading initiative.

With no further question in the queue I’d like to turn theconference back over to Greg Steinburg for any additional or closing remarks.

That concludes the question-and-answer portion of ourconference call today. We look forwardto speaking with you again at our fourth quarter earnings release which isanticipated to occur in April. We thankyou for joining us this morning and Happy Holidays.

That does conclude our conference call today. We appreciate your participation. You may disconnect atthis time.