Welcome to the American Greetings second quarter 2009 earnings conference call. (Operator Instructions) I’d now like to turn the call over to Greg Steinberg.

Joining me today on the call are Zev Weiss, our CEO, Jeff Weiss, our COO, and Steve Smith, our CFO. We released our earnings for the second quarter fiscal 2009 this morning. If you do not yet have our second quarter press release, you can find a copy within the Investors section of the American Greetings website at www.investors.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 10Qs, 10Ks and annual RevPAR are available on the Investors section of the American Greetings website. We will now proceed with comments from both our CEO and CFO followed by a question and answer session.

This morning we will share with you our fiscal 2009 second quarter results. I will briefly comment on our performance this quarter and then share some comments on capital deployment in our second half outlook. Similar to the first quarter we experienced mixed results in the second quarter. While encouraged that revenues were up, we are disappointed with the incremental costs necessary to generate that revenue. Given current economic conditions the revenue increase is commendable. Revenues were up as a result of improved card sales in North America partially offset by a slight decrease in our retail segment. Over the last couple of years many of you are aware that we have focused our resources on constantly developing fresh new products especially in our North American cards. This emphasis on creativity in our product helps consumers connect in a way that is authentic to them. I believe the changes we have made the last couple of years are showing up in our revenues. Operationally we had lower yielding sales meaning we generated less income as a percentage of net sales. The lower yield was driven by more costly content and lower sell-through. As an example, we sold more cards with higher content related costs such as music, lights and embellishments. We also shipped more products into retail with the expectation of increasing point of sale productivity. While sales did increase, the level of productivity improvement was not quite what we had anticipated. The lower-than-expected sell-through resulted in increased costs within our supply chain. We are working very hard to improve our sell-through in order to improve margins in future periods. In previous quarters we discussed the rollout of the new Canadian card line which as many of you may remember was a project to convert our Canadian cards from a…

I have three components to my prepared remarks for today. I will start with a few summary comments on our earnings this quarter, then I will share a brief review of our reported segments, and finally a quick walk-through of a few key components of our financials. We will then open the call for questions. Overall our second quarter consolidated revenue was up $8 million from last year’s second quarter or about 2%. Included in our $386 million of net revenue was a benefit from foreign exchange of $1 million over the prior year’s second quarter. So holding aside the foreign exchange impact, revenue was up $7 million still about 2%. However, our second quarter operating income was about $9.5 million lower than the prior year’s second quarter. The decrease in operating income was driven primarily by lower yielding sales in our North American social expressions segment. The lower yield is a result of a general mix shift towards cards with more content such as music and therefore lower margins. Lower yield also means higher distribution costs and increased scrap and returns. These costs are a continuation of some of the costs we discussed with you last quarter. To offset some of these increased costs we are working on productivity improvement projects. The projects include streamlining back office functions and reducing our overall supply chain costs. Now I’ll shift to the second component of my prepared marks, which will be a review of our reported segments. Our North American social expressions product segment’s revenues were up about $3 million versus the prior year’s second quarter. Our every day and seasonal cards drove this revenue increase. The increase was partially offset by lower revenues from gift packaging and party goods product lines. Our North American social expressions product segment’s earnings were…

(Operator Instructions) Our first question comes from Jeffery Stein - Soleil-Stein Research LLC.

You maintained the guidance at $160 million to $180 million but you also adjusted your estimated tax rate, so I’m just curious, I presume you’ve incorporated your new tax planning into your forecast and therefore it almost sounds like you’re saying you expect operating income to be below where you originally thought it might be.

Jeff, you are correct. We are taking into account the tax rate into that number.

Secondly, and this kind of went right by me. You mentioned something about an investment you’ve now made in Recycled Paper and I’m wondering if you could possibly elaborate on it a little bit just from a high level, why the interest in Recycled Paper? Are they a bankrupt company or just trying to restructure their debt and what got them into this position in the first place?

Jeff, I really can’t share anything beyond what we shared in the prepared remarks. Again, for the reason that we shared which is they’re in the middle of seeking to restructure their own balance sheet, we just don’t think it’d be appropriate to get into it any more.

So at this point you are a creditor of Recycled Paper having purchased $44 million of their debt?

We’ve purchased a majority of their first lien debt and the cash cost of that has been $44 million.

Can you tell us at what discount you have purchased that? What is the face value of that debt?

Again, for the reason I shared before, I think it’s a good question, it’s the right question to ask. It’s just given where they’re at and what they’re in the middle of trying to accomplish with their own balance sheet, we just don’t think it’s appropriate to comment anymore.

Understand. And on the licensing side, in your opinion and I don’t know what the balance sheet of Cookie Jar looks like, but is it possible that that transaction could be in jeopardy?

I think it’s very reasonable to assume we’re going to close that transaction this year.

Our next question comes from [Will Bate - Bate Capital]. [Will Bate: A quick question on the Strawberry Shortcake. Could you add a little bit more color to timing and how the process will look the next few months?

I think it’s probably not appropriate for us to get into the details of that just because we’re right in the middle of it. Again I would just reiterate what we shared before, which is we feel confident that it will close by the end of the year. [Will Bate: What’s delaying it? I missed that if you addressed that earlier.

It’s just what’s going on right now in the capital markets is affecting a lot of folks who are in the middle of transactions. And those overall market issues are affecting this transaction as I’m sure it’s affecting a lot of folks. [Will Bate: Do you expect the Recycled Paper transaction to be a future use of capital?

Again given where they’re at, because they’re in the middle of their own restructuring of their own balance sheet, we just don’t want to get into any more details on it. Again we’re not trying to be difficult. We just think it’s not appropriate at this moment.

Our next question comes from [Robert Hayley - Gadelli]. [Robert Hayley: A question on the Strawberry Shortcake transaction. You expect it to close at the end of this year; do you mean calendar year or your fiscal year?

I’d say fiscal year. [Robert Hayley: Could you just talk about generally what sort of financial impact you would expect to see from that transaction on your margin structure in the short term and then in the longer term?

I think specifically you’re asking, given that we have an overall properties business and that we’re selling two of the larger properties but we still have a number of other properties, some classic properties and some newer ones, what do we expect the run rate to be? Is that it? It’s too early for us to comment on that because we haven’t gotten through the transaction yet. Clearly we will have a different operating structure but what that will exactly look like, we’re still working on. We’ll be prepared to talk about that when the transaction closes. [Robert Hayley: So is it safe to assume that might be something that will evolve then post-transaction?

Yes. Clearly our operating model will be different given that the properties business will not have two of its largest assets in it. So we’re going to significantly have to adjust that model but what that exactly looks like, we are not prepared to talk about. It will look different. [Robert Hayley: Could you talk about the debt on your balance sheet? It looks like you took on some short-term debt in the quarter. And what drove that?

It’s part of our normal working capital cycle. The historical pattern has been for us to go from trough to peak borrowings that swing between $125 million to $150 million on average. And that’s what you’re seeing in this fiscal quarter. [Robert Hayley: Any general comments on retail foot traffic? Any door closure impact to your business you’ve seen?

I think what you read about in the press in terms of major retailers comp store sales; I think we would see very consistently in our results and what we’re seeing as well. I don’t think we’re seeing anything that is inconsistent with what you’re reading about in the press.

Our next question comes from Jeffery Stein - Soleil-Stein Research LLC.

I’m wondering if you can provide any update on the study you’ve been conducting regarding possible consolidation of two manufacturing plants?

We haven’t announced anything on that. Just to give the background, we’ve announced that we’re looking at two plants, one of them in Michigan and one in Tennessee, and we shared that in the fall we were going to be able to react to that. And we have not announced anything yet and I don’t think we want to do that on this call. We’re not ready to do that yet.

There have been a few retail bankruptcies announced recently, Mervyns being one, and wondering if any of the recent bankruptcies have affected you in terms of receivable exposure?

We prefer not to comment on specific accounts Jeff, but we have taken into account some of the recent activities and we’re well reserved for those that are public.

During the quarter your other non-operating income increased almost double. I’m wondering what the reason for that was? [Inaudible] income?

Other non-operating income was more foreign exchange Jeff. We had about $1.2 million of fx incremental quarter-on-quarter.

Our next question comes from Mike Hughes - Delaware Investments.

Two questions for you. The $210 million of debt that’s due within a year, can you just review the composition of that, just all the revolver? And the second question, the operating cash flow is pretty weak in the quarter and I think most of that’s related to drawing down AP and other liabilities. Can you just address that too?

The $210 million is our current portion of long-term debt. It doesn’t mean that it’s necessarily due. As was asked earlier, the borrowings are driven by working capital cycle. In addition the investment that Zev previously mentioned in Recycled Paper Greetings, the working capital cycle will play out through January or February where cash will start coming into the company starting in mid-November. As it relates to operating cash flow of the quarter, it’s actually pretty much close to plan for us if you adjust for again a couple of factors, one of which is we’re a bit heavy in inventory this particular quarter. We mentioned earlier in the call how we had a change in a Canadian product line. Some of that is rippling through our system as well as we have additional accounts on scan-based trading. A little bit of increased inventory there. And finally some additional carry of what we call tech cards. Those are all weighing against us on operating cash flow for this fiscal quarter.

If I look at the cash flow statement provided in the press release for the six months ended 08 versus 07, one of the big deltas is the accounts payable and other liabilities. That’s a use of about $70 million this year versus $23 million last year. So what’s going on with that line item? And back on my debt question, what is the actual composition of that? Is that all the revolver, the $210 million?

Let me answer the first question and then I’ll get to your second one. First of all, within accounts payable and other liabilities the accounts payable balance is pretty much flat with prior year. If you look at our DPOs, they’re flat. What’s happening within that account are two things. First, there’s a change in taxes payable that’s accounting for the bulk of the delta really a change-on-change versus prior’s cash flow. And secondly, just due to the cutoff this year of our fiscal quarter on August 29 there was some timing of compensation payments, basically salaries to our employees that were carried differently due to the month-end cutoff. As it relates to the components of the borrowings, we have both a revolver and our asset-backed securitization being utilized this quarter.

Our next question comes from [Will Bate - Bate Capital]. [Will Bate: You do read a lot about some of the larger retailers but you don’t hear too much about the independents. Can you guys sort of speak to the foot traffic and financial health you’re seeing at some of your mom-and-pop and independent chain customers?

As you know and I know many others know, for us we’re primarily a large mass retail company and the independents for us is a very small of our overall business. Truthfully I haven’t seen a whole lot one way or the other but it doesn’t affect us in a large way. [Will Bate: Would you say it more or less tracks the performance from a comp store sales perspective of the larger guys?

I haven’t seen anything that is inconsistent with the larger guys, but again it’s a really small part of our business.

At this time we have no other questions.

That does conclude the question and answer portion of our conference call today. We look forward to speaking with you again at our third quarter earnings release which is anticipated to occur in late December. And we thank you for joining us this morning. Here ends today’s call.