Good day and welcome to the American Greetings fourth quarter 2008 earnings conference call. (Operator instructions). I would now like to turn the conference over to Mr. Greg Steinberg, please go ahead sir.

Thank you Katie, good morning everyone and welcome to our fourth quarter conference call. I’m Greg Steinberg the company’s treasurer and I help manage our investor relations. Joining me today on the call are Zev Weiss our CEO and Steve Smith or CFO. We released our earnings for the fourth quarter of fiscal 2008 this morning. If you do not yet have our fourth quarter press release you can find a copy within the investor’s section of the American Greetings website at invenstors.americangreetings.com. As you may expect some of our comments today include statements about projections for the future. Those projections involve risks and uncertainties that could cause actual results to differ materially from the forward looking statements. We cannot guarantee the accuracy of any forecasts or estimates and we do not plan to update any forward looking statements. If you would like more information on our risks involved in forward looking statements please see our annual report or our SEC filings. Previous earnings releases as well as our 10Ks, 10Qs and annual report are available on the investor section of the American Greetings website. We will now proceed with comments from both our CEO and CFO followed by a question and answer session. Zev.

Thank you Greg and good morning everyone. Today we will be sharing with your our fiscal 2008 fourth quarter results. In summary, I am pleased that we were able to achieve full year earnings per share from continuing operations of $1.53 which was right in line with our guidance. We were able to deliver cash flow above our guidance and we continue to make investments in our business to better position the company for the future. This morning I have three sections to my comments. First I will take a step back and look at some of the investments we have made over the past year including both our strategic card initiative and our photo strategy. Second I will share a few high level comments on our financial performance and capital deployment. Third, I will conclude by sharing our fiscal year 2009 outlook. Then Steve will walk you through the details of our fourth quarter performance. Many of you know that two years ago we launched an initiative at our core card business known as our strategic card initiative. This initiative was designed around the findings from enhanced consumer research. The enhanced consumer research was used to improve both the consumer shopping experienced and the relevance of products for consumers. The strategic card initiative was also designed to reduce inventory in the field, enabling us to flow subsequent product changes more frequently and efficiently. The strategic card initiative has progressed well over the last two years. We have reset thousands of retailer’s doors with new product and fixtures and subsequently placed new cards in tens of thousands of retailer’s doors. We have made adjustments to the strategic card initiative’s rollout as we have identified opportunities for improvements along the way. And I expect we will continue to learn and to…

Thanks Zev. Today I have three sections to my prepared remarks. First a few comments on our consolidated revenues. Second a brief review of our business segments and third a walk through some of the key components of our financials for the fourth fiscal quarter. We will then open up the phone lines for your questions. Our reported revenues for the fourth quarter were $493 million which is down $3 million from last year’s fourth quarter or one-half of one percent. Revenues benefited from two factors and were reduced by one. I will explain all three factors, the net result as that consolidated revenues were off after considering these factors about 3%. Revenues benefitted from both foreign exchange and lower spending on our strategic card initiatives. Revenues were reduced due to the sale of our candle product lines during last year’s fourth quarter. The revenue benefit from foreign exchange was $11 million over the prior year’s fourth quarter. We also had a $6 million revenue benefit versus the prior year as our strategic card and scanned based trading initiatives had less activity than last year’s fourth quarter. You may recall that in December we expected our card initiatives would be an incremental drag on revenues and earnings fourth quarter on fourth quarter. However the higher expenses for scanned based trading did not occur. As Zev mentioned, we believe that about $10-$15 million of the possible spending anticipated in fiscal 2008 might now carry over into fiscal 2009. So, revenues benefitted from both foreign exchange rates and scanned based trading patterns in the quarter. What was the third of the three factors I mentioned? It was the fact that we sold our candle product lines in the fourth quarter of fiscal 2007. That divestiture reduced our quarter on quarter revenues about…

(Operator instructions). And we will take our first question from Kathleen Reed with Stanford Financial.

Hi, good morning everybody. I guess first question, just a little more clarity on your tax rate, so by my calculation a 33% rate for the full year versus an assumption you know previously in the high 30% range for the year is like a $0.15 swing in earnings, so even using $1.53 minus $0.15 you still get more towards the low end of your full year guidance and I just wondered if something came in a little bit less or lower than you had expected, if there was a swing factor? Was it really the Canada situation which I have a follow up question on as well or was there some other issue that was a little bit then worse to offset the $0.15 incremental benefit?

Sure Kathy, actually I’ll widen out your question to hit two pieces, one that you may ask again later or ask later regarding the scanned based trading performance as well. So if you look both at the tax rate, which you’re correct, was around $0.15 and then the under spending if you will against scanned based trading which is worth roughly $0.10, it’s about a $0.25 difference from our expectations in December. There were really three items that impacted us in the fourth quarter that would address that $0.25. The first item was the costs or were the costs associated with the implementation of the new product line in Canada, that account for about 50% of the delta. Second of all we had some additional film production costs which were higher than anticipated, that was about 25% of the delta. And third our retail store operations did not perform as strongly as expected either at Christmas or at Valentine’s Day and that was the bulk of the remainder. So those three items, the Canadian line, the film production costs and the retail store performance really address your question.

Okay and I guess just to elaborate on the Canadian, the changes that you made to Canada, can you just explain that a little bit more, you know dual prices, that you’ve had I guess for a really long time, so now you’re moving to one price and so is it that you had to take the inventory back and put new cards out or can you just give us a little more information there?

Yeah, there’s a couple components to it. I’ll just share on two of them. Two of those components are, one of them was what you describe which is there’s a lot of physical changing going on at retail in order that there is some kind of a cleaner transition than this product turning over very slowly. And the second has to do with ramping up production in order to make that happen in a relatively short period of time. And there are others as well but those are two very big components.

In your prepared remarks somebody mentioned something about technical cards and then manufacturing costs. So like the manufacturing costs I guess would continue because you’re still doing that but what is it, did I misunderstand that technical cards?

Yeah so those are cards that have either lights or music or lenticular or a combination of all three and I think that’s correct, I would expect that to continue.

Okay. Steve can you actually give us the card actual charges not the delta year over year but the actual dollars spent on the card program and scanned based trading and what line items they were in the fourth quarter and then for the year.

So here you’re looking for the effect of scanned based trading and the card initiative, sure so for the fourth quarter the revenue effect of the two of them, we can get offline into the details if you’d like but the revenue effect of the two of them was around $16 million. And the EBIT impact of the two of them was around, a little bit lower but $15.5 million, $15 million. So for the year Kathy the revenue impact of the two card initiatives was $31 and the EBIT impact for the fiscal year was $34.

Okay and can you, in your guidance, my last question I guess for fiscal 09, can you give us what you’re assuming for you know is it $10-$15 for the card program and scanned based trading or was that just the minimum amount and if you can quantify the amount of spending on your IT program and your integration charges because I’m assuming your new guidance includes all of the spending for all of that.

Sure, why don’t I maybe hit the beginning of that conversation about SBT and maybe let Zev address the IT component. On the SBT portion of your question, for next year we anticipate at least $10-$15 million which is the carryover from prior but not a whole lot more beyond that at this time. The challenge that we have is always anticipating when these particular negotiations close. There’s a lot of technical complexity in executing the scanned based trading arrangements and it’s really a dynamic where both parties have to be in lock step in order to launch the initiative. And maybe Zev wants to talk a minute or two about the IT.

Yeah, we’re, as we announced, we’ve begun by picking a software vendor for us and that was a move that we made towards the end of last year and something that obviously is ramping up for this year. This year will be much more around getting ready for, starting some serious implementations that will happen starting this year and then it will probably ramp up I’d say in FY10 and beyond. So you’ll see this beginning in this year, both in terms of preparing as well as probably the first couple of, I call them the early implementation moves that we’re looking to make with SAP.

Can you quantify that at all?

Sure, we’re not going to give a specific figure this year but the primary reason that cap ex is up year on year, we expect will be related to IT spending. So we do have some IT in our capital budget for fiscal year 2009 as well as in our income statement but we haven’t quantified the specific amount Kathy.

Okay and the last piece is just any integration charges for Webshots or the other one that you can quantify?

We don’t have any integration charges beyond what’s already been absorbed in our fourth fiscal quarter which was a couple million dollar drag on earnings.

Okay, great, thank you very much.

And we will take our next question from Jeff Stein with Soleil Securities.

Morning guys. A couple questions, wondering if you could just talk about the biggest pieces that would account for your forecast of lower free cash flow this year?

Well the biggest reason for the delta would be the fact that we’ve already harvested from the balance sheet both the accounts receivable and deferred cost assets. Those have been significant contributors as add backs to cash flow over the last few years, not just fiscal 2008 and we’re not expecting as much if any add back in fiscal 2009 Jeff.

And would that, could you isolate the deferred cost piece of that Steve?

Yeah, no we haven’t as we’ve done historically Jeff, we haven’t broken out deferred costs separately from the working capital in the fiscal year. So we prefer not to.

Okay and just form a very high level can you just talk a little bit about how you see higher earnings per share on relatively flat revenues, I assume there’s some benefit from share buybacks but is there anything else?

Yes, it’s a combination of several factors. You know you mentioned share count, we will expect to have less interest expense, the combination of those two Jeff should be worth somewhere in the neighborhood of $0.15 earnings per share. We should also probably benefit from lower scanned based trading spending that would be worth in the neighborhood of $0.10. You know I think those are the major drivers.

Okay and inventory increase, can you explain that pieces that accounted for the 18% inventory increase year on year?

Sure, let me give you a couple of the major ones. So you noted there’s been a $34 million increase, the majority of which are the increased content for these technology cards which have a higher cost that Zev mentioned a few moments ago with Kathy, that’s one. And two, the inventory associated with the Canadian product line. In addition there was a little bit more, a small amount for the scanned based trading relationships since we carry those at wholesale and lastly a little bit of FX in our balance sheet.

Can you talk about the growth in technology cards, what percent of your mix does that account for today versus LY and would that continue to consume working capital on a go forward basis?

I wouldn’t call it a large percent Jeff, I don’t know if I can give you the exact number, it’s not a large percent, it’s possible that you’ll see that growing. It’s very hard to predict you know how big it will get and how long lasting it will be because we’re always trying to make sure we understand where the marketplace is and how consumers are responding and then we try to make sure that the product is there to reflect that. So not an easy one for us to predict. But it’s not a large percentage of the total offering.

Okay and final question, can you talk about the number of doors that you have reset with new product over the past two years and this would exclude Wal-Mart and Target and how many doors you would guesstimate you will reset this year?

In terms of new product including our full customer base, including Wal-Mart and Target I mean we had shared in the script tens of thousands and I don’t have the exact number but we’re talking about from a product perspective, a major part of our door base. In terms of reset activities, it’s very much in line with the resets that we had originally anticipated you know which is not 100% of that door base but a pretty significant percentage.

Okay, thank you.

And we’ll take our next question from Dax Vlassis with Gates Capital Management.

Hey, how’s it going, I’m just wondering if you would explain a little bit more what’s going on with the royalty business, why the expenses were so high and you know you said you were making investments and could you just give us a little bit more details on what’s going on in that segment.

Sure, I’ll start and maybe Zev will have some additional comments. On the expense side Dax we had some higher production costs for entertainment development in the quarter. That’s the primary reason for the degradation in the EBIT line, what we call revenues less expense. And maybe Zev would care…

Yeah you know if you look at the business it’s composed of a couple of very strong classic properties in Care Bears and Strawberry Shortcake and we’re developing a number of new properties that are in their very early stages and so part of what you’re seeing is the costs associated with the development of those properties.

Okay and what about as far as acquisitions sort of direction the company is going to take, it seems like you made a couple in this sort of digital photographs and photo sharing sort of space, I mean do you have enough of a base there or where would your strategic, where would your strategically be looking for acquisitions if any?

It’s a difficult one to predict in terms of, not in terms of where we’re looking but in terms of what we could actually get closed just because of the way the marketplace works around acquisitions. I think what you’ll see is we’re going to be focused in continuing to grow our core business and if there are acquisitions that make sense for that in terms of overall social expressions, we’ll be interested. And the other one is in the interactive area, we’ll look at opportunities to broaden our social expressions presence in the interactive world whether that’s in photo, cards or other areas. So we’re always looking in those two areas and it’s hard for me to say whether you could anticipate that there’ll be something happening, it’s just too hard to tell that. Those are the areas that we’re looking.

And one last question, you said something about break even in retail, do you expect to reach that this year or what timeframe are you kind of looking at that?

Yeah we are hoping to reach that this year, so it’s an immediate timeframe.

Okay, thank you.

We will take our next question from Mike Hughes with Delaware Investments.

Good morning, a couple of questions, just kind of an accounting question first, on the current assets deferred and refundable income on the current side declined by about $60 million year over year and then on the long term side there was an increase of about $80 million, what’s going on there?

Sure Mike what you’re seeing are just some changes within the tax accounts but if you take off four of them, the deferred refundable short term, deferred and refundable long term, income taxes and then deferred income taxes and you add them all up, compare them to the prior period, you’ll see there’s less than a $5 million swing. It’s just some re-class due to if you’re interested FIN 48 and some other accounting, FAS 158, that’s occurring within our balance sheet.

Okay and then what’s your assumption as far as raw material cost increased for fiscal 09?

We’re seeing what everybody else is seeing and it varies depending on the commodity. In some cases we’ve got longer term contracts in place that could either eliminate the increase in the short term or soften the increase but in many cases we’re dealing with spot markets and dealing with the same increases everybody else is seeing.

So what have you assumed as far as a dollar amount increase 09 versus 08?

I’d prefer not to get into that.

But is it safe to assume you’ve baked in a fairly good cushion, sizable increase?

Well you know again we’re doing the best we can looking at the market, I don’t think we’re necessarily the best predictors of commodity prices but we kind of look at where we are today and make what we think is the most accurate prediction for the year.

Okay and then last question, any reason you’re not disclosing the costs related to the upgraded IT systems?

I think the reason is because our anticipation is this is going to be an ongoing investment over a pretty long period of time and it’s part of our day to day operations.

Okay, thank you.

We will take a follow up question from Kathleen Reed with Stanford Financial.

Hi, I think when you were giving your segment revenue results, the international sales were up over 20% year over year in local currency and I think you had said part of that was due to Europe new distribution and I just wondered, you know it seems like the UK and Europe has been a really negative region for you for a long time just as some changes in the way people are shopping and if you could elaborate on if you’re seeing any improvement in that or was this growth like on all [studis] and new accounts and therefore that business should continue until we anniversary it?

I actually think that the market environment continues to be as challenging as its been over the last number of years and a lot of the forces that we were seeing in the last number of years continue today. I think that group has worked extremely hard at adjusting the operations to accommodate that. So they’re getting some benefit from increased distribution and some of it is just continuing to work at the efficiency of the business and we’re seeing some of that improvement because of that. So we hope that it’s something we would consider to be steady.

But that, like that 20% increase, was that some new accounts you signed on, so again we should, that’s new business that won’t anniversary until the fourth quarter of 09?

There were two components to it, one of them had to do with the new distribution the other piece had to do with some of the, they had some operating costs that were in their top line and in their bottom line in the previous year that they didn’t lap. So you know the hope is is that that would continue as well. We wouldn’t take on more of those operating costs.

Okay and then also just on your fixtures business, I know that’s not a very exciting piece to talk about but is that business eventually going away or is that just third party suppliers of fixtures that you sell to other, you know either other card companies or other companies that use your fixtures, is that a business that will eventually go away?

No, it’s not, it’s a business that, it’s an important strategically important business to us because it supplies our greeting card business for fixtures and obviously that’s an important thing for us. That business has from time to time excess distribution depending on how many fixtures they’re shipping to American Greetings and they contract out that excess distribution to other people who want merchandising vehicles, most of the time outside of the greeting card business. And depending on their excess capacity year to year, they’ll sell different amounts out. And so that’s why you’ll see that fluctuation from time to time.

So with the results down does it mean you bought more of their fixtures or does it mean that somebody else, I mean I think it means the other demands from the other product categories were down.

It could be either one and in this case it was probably more likely the latter.

Okay and then can you just, your overall view for the economy for 09 I think you said it remains challenging, I mean are you seeing any changes with retailers or consumer shopping patterns? I mean you have a lot of retailers on scanned based trading so that obviously helps your inventory levels and their inventory levels of cards but is there any other tell you can give us on what you’re seeing for some of your products? I think the perception is a lot of your product line is pretty discretionary.

I don’t think we have any insights into what’s happening to the economy or to retail that you wouldn’t pick up from others. We’re seeing the same thing that you would see reflecting in our partner’s announcements about their own numbers. So yeah it’s the same thing that you’re reading about and seeing you know the same thing that is, what we’re seeing and what’s guiding our perception about next year.

And then the last question, share repurchase I think you said you bout 4.7 million shares, half was through the $100 million program from April and half was through the $100 million program that you announced this January, can you just talk about if you bought any then in the first quarter of 09 or if you could just give us how much you have remaining?

Sure, we aren’t going to comment about purchases within the quarter, so I’m limited to what we’ve said about through the fourth quarter Kathy which you’ve just restated.

So, for the $100 million program I could just take half of 4.7 and then subtract that from $100?

Correct.

Thanks.

Thank you and with no additional questions in the queue I’d like to turn the conference back over to Mr. Greg Steinberg.

Thank you Katy. That concludes the question and answer portion of our conference call today. We look forward to speaking to you again at our first quarter earnings release which is anticipated to occur in later June. We thank you for joining us this morning.

Thank you that does conclude our conference call today, we appreciate your participation, you may disconnect at this time.