Good day, and welcome to the American Greetings Corporation fourth quarter 2009 earnings conference call. Today’s conference is being recorded. At this time I would like to turn the conference over to Mr. Gregory Steinberg. Please go ahead, sir,

Thank you, Deanna. 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 our CFO. We released our warnings for the fourth quarter fiscal 2009 this morning. If you do not yet have our fourth quarter press release you can find a copy within the investor 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 the 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 10-Qs, 10-Ks 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 I’ll cover three broad topics. First I will share with you our fiscal 2009, fourth quarter results. Second I will speak about the recent strategic moves we made to strengthen our business model by focusing even more on our core business and third, I will share a few directional comments on our outlook for the fiscal year 2010. Steve will then present more details behind our fourth quarter performance. This past fiscal year has been a challenge for us. During the first half of the year we were pleased to see increasing sales, but we were faced with margin pressure from a variety of factors, some of our own creation. During the second half of the year revenue softened and we took action to more aggressively reduced costs, including headcount reductions in both December and January. During the fourth fiscal quarter revenue was down across all of our businesses and our margins were negatively impacted by our operating leverage. We are dissatisfied with our overall performance. We have and will continue to be more vigilant in managing our supply chain and becoming more cost efficient. On a positive note you may have seen the recent news about our acquisition of both Recycled Paper Greeting and Papyrus brand, and a sale of our Carlton retail stores. We are very excited about this transaction as they strengthen our foundation for the future. I will share more with you about these activities in a few minutes. During the fourth quarter, as we look at our core operations we experience softness across all our businesses. However it was more pronounced in both the international and retail segments. Within our U.K. based business we were impacted by the weakening economy and as we discussed last quarter the…

Thanks, Zev. I’ve three components to my prepared remarks today. I’ll start with comments on several major items that impacted our consolidated results this quarter. Then I’ll share review of our reported segments, finally a quick walk through a few key components of our financials. We will then open the line for questions. As many of you know, we acquired Recycled Paper Greetings or RPG at the end of our fourth fiscal quarter. As a result their financial statements are included in our consolidated financial statements. There was essentially, no income statement effect during our fourth fiscal quarter, since the transaction occurred at the end of the quarter. Going forward the results of RPG will become part of our North American Social Expressions segment. In addition, as part of the transaction we garnered two additional benefits that are not readily visible in our financials. First, one of the outcomes of purchasing RPG through a prepackaged bankruptcy is the recognition of cancellation of debt income on RPG’s books. That cancellation of debt income does not directly affect our financials, but does benefit our covenant calculations for fiscal 2010. Beyond the covenant benefits, we are expecting our cash flow to benefit from significant tax attributes associated with the transaction. One of the more significant aspects of the transaction beyond their creative model was the tax attributes we gained by buying this company out of bankruptcy. We expect the present value of the cash tax attributes to be greater than $35 million. Switching gears from a couple of the major financial benefits of the RPG transaction to our performance in the quarter, our consolidated revenue was down $71 million from last year’s fourth quarter or 14%, included in our $423 million of revenue with the adverse impact from foreign exchange of $31 million…

(Operator Instructions) Your first question comes from Jeff Stein - Soleil Securities

I was wondering if you could just address some of the acquisitions that you’ve just announced in terms of some of the one time costs that you foresee during 2009 and ultimately if you look at RPG, if you look at their revenue run rate and expenses on the date you acquired them, where do you see each of those components of the P&L a year from now?

So let me talk about the one time costs, I’ll do that one first. Because we did these two moves so close to each other and they are both related in certain ways, we are still putting together this rather complex integration plan that involves basically AG, Papyrus and RPG. So, I don’t have that yet, so it’s not something that we can give you just yet. We will have it pretty quickly and it’s something we hope to be able to get moving on as quickly as possible. I think in terms of the revenue and expenses I think where we are trying to get at is what should we work in as the long term run rate for profitability, which is what I think you are trying to get at; so, we are not yet sharing that information, let me share a couple of things. While we believe that it will be slightly accretive in this year, from a long term perspective I think there’s two things just to keep in mind as you’re working that through in your mind; one of them is, that this is primarily a greeting card business and from that prospective it ought to be something that works very well into the model that we’re very used to as a company and then therefore ought to be very profitable. Balancing that is going to be the need to run this and our desire to run this as a standalone business and to maintain some of the strengths that has made that company very strong over the past number of years and that will involve some incremental fixed costs. It’s going to be balancing out those two that will lead to the long term run rate profitability.

Just from a high level Zev, if you were to compare that relative to the profit potential Papyrus, just looking at it on kind of link a percent of sales after its fully integrated, it would just seem to me that Papyrus produces higher value product, higher cost product and therefore if you look, brought everything down to the operating income line it would just seem to me from a high level that Papyrus is probably a less profitable revenue stream?

I think I understand what you’re saying and as you’re particularly saying as it relates to the way the cost of goods structure works, in Papyrus versus RPG. I’m not sure if I would necessarily jump to that conclusion. I see where you’re coming from with it. They also sell at a higher price point. So, I think at this point, both of them really have similar characteristics and that we’re going to want to maintain some standalone nature to the business, which will involve some ongoing fixed cost, yet there should be benefit to it, because it be a card business and I think that the two ought to be relatively similar in that manner.

Then finally, could you talk a little bit about again, strategically your decision to make an investment into Schurman Fine Paper and your conviction level that they’re going to be able to run this business and make progress with this business, given the fact that we are dealing with a very difficult retail environment and the fact that they have their own retail business, which we really no very little about and how is that performing in the current environment?

First of all I think the opportunity for them to remain entirely focused on retail, is going to be a real strength for them. In the past it was a relatively small business and it had a retail component and a wholesale component, which meant it really had to keep its eye on two different games which is a very difficult thing to do. I think the fact that they’re going to be 100% focused on driving the retail stores, is going to be a real strength for them. I also think that the management team there really does an outstanding job when it comes to product development and they’ve shown that in the Papyrus stores. I think they’re going to be able to bring that strength in a broader way beyond just cards and wrapping stationery into the AG stores and the Carlton stores. I think that’s going to be a positive as well. So I think there’s a really strong management team. They ran a really outstanding store in their Papyrus stores and I think they’re going to bring that strength to Carlton and AG as well.

Are you guys going to go on their board and will any of your retail management team stay-on as part of the new retail business of Schurman?

We have a small equity stake. We do intent to, we will be on the board and there will be a transfer of some of the management of our retail group to that group as well.

Your next question comes from Carla Casella – JP Morgan.

One clarification question, you talked a lot about covenants, I appreciate that color. The $100 million of cancellation of debt income, will that recur in 2010 and where is that flowing through in the income statement currently?

This is Greg Steinberg. That was an item that occurred with respect to RPG’s bankruptcy and then recapitalization. So we would not expect that to occur again in the future and that’s actually reflected on RPG’s books. It does not show up directly on American Greetings consolidated financial statements.

Okay. So in 2010 we’ll be looking at more testing the covenant versus just American Greetings EBITDA?

Yes, that would be the expectation.

Then on the retail side, your retail customer side, are you noticing any change in their payment practices or have you changed any of your terms with any of your retailers?

Actually, we just looked at our DSO pretty recently and I did not see any change in that.

If you look at our DSO, in the full year just ended versus the full year prior we were right at the same 13 days year-on-year.

We will take our next question with Phil Austin - [Zelanore]

I had a couple of quick questions. One is can you comment on the change in volume versus price in the domestic greeting card business?

Yes, when you look at what’s going on in price, I think there’s a couple of things happening and those are all balancing out and maybe Steve you could talk about how they balance out. I think you’re seeing two dynamics going on. On the one hand, there is some pricing mixing up because of what we’re doing with music and technology cards and so some of that’s happening. At the same time there are some more cards being sold at value prices and I think that’s happening for two reasons; one, of them is because of just this strength probably in terms of the dollar store segment, but also perhaps, and this is just a speculation that towards the back half of the year there might have been some trading down as well. So, you had two dynamics going on, probably a little bit more happening on the value cards and then you also had some of that being offset by some mixing up happening with the music and technology cards.

Yes, that’s exactly right. Tomorrow when you file our K, you will see for the year in cards across the globe, we are basically flat in total dollars with pieces up a little more than 2% and prices down due to mix shift as Zev mentioned, toward more value pieces down about 2%, so they roughly offset each other.

I was hoping you could do two things. The last caller asked about the over $100 million tax benefit. I was just doing the quick math on the implied EBITDA from your covenant calculation and if you could just help me out with it, I think I get to $260 million of trailing full quarter implied EBITDA; is that right?

EBITDA is a non-GAAP number and so we historical have not provided that publicly as it requires reconciliation.

Yes, but you’re providing a leverage ratio and your total debt was 390. So is there a difference between providing those two numbers and then dividing one by the other and getting the implied EBITDA.

In addition to the debt that is publicly stated, Greg noticed that we have in addition to that Phil, letters of credit that go into the calculation too.

How much are those?

We haven’t shared that at this point.

Is there a reason why you can’t share them?

No, we can share them Greg, about $26 million at the end of the quarter.

So, you’ll add $26 million to the balance sheet debt to get total debt?

That would get you, yes, roughly right in that spot.

Okay. So then the implied EBITDA from that is even higher, it’s like $277 million; is that correct?

Don’t forget that the debt calculation Phil is a net debt calculation, so you subtract off cash on the balance sheet.

Okay and that was about 60?

That’s correct.

Okay and so assuming implied numbers to around 237, 240 implied EBITDA. Is that right?

Directionally yes, you’re correct Phil.

Okay. I guess if I take off that, when you said it was in excess of $100 million, the tax benefit from RPG, is $100 million a good number to use for that?

Let me clarify that Phil. The tax benefit from RPG was greater than $35 million. The Cody income was in excess of $100 million.

And the Cody income is what goes into the leverage calculation?

Yes, it goes into the EBITDA trailing basis, correct.

If I take that $100 million out of there, then that would sort of be an implied EBITDA number, excluding that for the last 12 months. Is that a fair statement? If I take that $100 million Cody number out of the 237, that would get me sort of a pure EBITDA number for the leverage calculation?

I’m not sure what you mean by pure. The number for the leverage calculation does include the Cody income.

Okay, so I guess my question is, excluding the Cody income, are there any other add backs to that number?

Yes, there are series of other non-cash add backs that would go into an EBITDA number as you would expect, thing like impairments associated with the goodwill, other intangibles, the non-cash impairment at our retail stores. So, they capture our variety of those other type items that would be in the crediting agreement defined EBITDA non-GAAP number.

Is there any way you guys can provide a schedule of how those role-off in the quarters?

We can consider it, Phil. We hadn’t thought about it.

Yes, it’d be really helpful for I think the investment community to be able to calculate some pretty key numbers for the company.

Alright, we’ll think about it.

Then can you guys also just comment on what’s in the other liabilities account on the balance sheet, there’s 105 in current and then 150 in long-term, so it’s a total of about $255 million?

Other liabilities is mostly related to our deferred cost asset account.

What does that mean exactly, sorry?

Well Phil and maybe we can take this offline later, but in our business there’s a whole concept around entering into multiyear contracts with retailers; that includes different types of advance discounts, which can then be capitalized. There’s also different types of agreements to make payments to retailers overtime associated with those contracts that are then liabilities. In Steve’s prepared remarks, he walked through the details of that in his balance sheet comments, but I’d be glad to walk you through that in further detail if you’d like.

Yes, that would be good. I don’t want to waste anymore time on the call with that. I guess if I could just ask two more quick questions; you did a little bridge from the net loss to adding back a bunch of thing earlier. I’m wondering if you can do a bridge for us as well from the $17 million of cash flow after CapEx this year to the 70 and just some sort of big buckets, what’s margin improvement, how much cash flow from the acquisitions, big buckets like that. Then just if you could also just answer one other question which is the deal dynamics around the Care Bear’s and Strawberry Shortcakes. You were a little bit vague in your description of it. Where are you in the process or the next steps, that sort of thing?

So on the first question, we haven’t given specific earnings guidance Phil for you, but we could give you a rough assessment of how you could get to the greater than $70 million, given what’s already out there on the street. So, let me start there and see if that satisfies your need and then I’ll let Zev talk to the deal dynamics that you ask about. If you look at what’s out there currently on the street, again, we can’t say we do or don’t endorse that with just what’s available to you. You would see that the street has about a $35 million plus or minus net income that’s out there. If you add back the D&A of the corporation in the prior year and you subtract off the midpoint of the CapEx guidance which we did provide, which we said was 35 to 45, take 40 out of it. You then look at our comments and we said that the combination of working capital and deferred cost together will be positive and people have speculated that’s anywhere from $10 million to $40 million. Why don’t you just pick a mid point there? Then you look at the tax benefits that we mention from RPG. If you sum total it all up, you’ll see that cash flow from operations, less the CapEx that I mentioned of about $40 million would be greater than the $70 million for the fiscal year 2010.

In terms of the deal, I’m not sure I want to get into the details of the deal dynamics. I could just walk you through the steps. We had received an offer from MoonScoop. I think it was towards the ends of February and that was pretty quickly, the folks at Cookie Jar exercised their right to match that offer and they’re currently in that period of time where they’d match the offer, they’re lining up their financing and then that’s sort of the point where we’re at right now and when there’s an update to be shared beyond that, we will share it.

Your next question comes from Jeff Stein - Soleil Securities.

The $35 million of tax benefit, are you expecting to realize all of that in the current fiscal year?

No Jeff, definitely not, that’s stretched out over multi-years. That’s the NPV of that multiyear cash flow benefit from taxes.

So, could you give us just a rough guesstimate in terms of how much Steve, would fall in the current fiscal year?

A small fraction of that Jeff, in the current fiscal year.

As we go back to the fourth quarter, I’m wondering if you could possibly adjust out all of those fixed components. Obviously, the biggest one is isolated on the P&L, but looking at, for example what line items the licensing expense, what line items the $0.10 of severance expense and the accrual for bonus adjustments; what line items are affected on the P&L and by how much?

Sure, okay this will take a minute Jeff, but let me run quickly through it. Well, first let me start with the largest goodwill impairment. Goodwill impairment we said it was $47 million. You’ll see that running through the non-recurring gains and losses. For the production write-downs that was $16 million in our MLOPC; for the severance that ran across three categories of the P&L, roughly $2 million in MLOPC, $4 million in SD&M and roughly $1.5 million in A&G. We had a loss as we talked about in the quarter on the RPG debt. That occurs in other non-operating income and expense of about $2.7 million and then lastly, we mentioned that we benefited from the prior year’s comparison to bonus and profit sharing. There is about a $10 million item in the A&G.

Steve, one additional item, there was the retail fixed asset impairment of about $1.5 million that ran through our selling distribution and marketing line.

Could you explain the licensing component, because I’m not sure I understand that, the $60 million item; and should we be looking at that as a non-recurring item?

It’s related to the production costs during the year. Hard to say whether you should look at it as non-recurring or not; we just disclosed that as cost and expenses of the quarter.

So that runs through MLOPC?

Yes.

Okay and this is part of your licensing business. So if this deal closes, that would go away?

We wouldn’t recognize those in the future other than possibly at close.

Are you going to maintain your licensing division on a go forward basis?

No.

I think at this point Jeff, we are going to take everyday as it comes and we have to get through this transaction and then we’ll decide what we do with the remaining properties that we have.

Depreciation and amortization, can you tell us what that number is estimated to be, will it be similar to the $50 million you reported last year?

We didn’t give you an exact figure, but it’s likely to be slightly down off of prior.

Your next question comes from Brian Courville - Mentor Partners.

You disclosed how much stock you bought within the quarter out of the $75 program. Can you tell us what you’ve done subsequent to quarter ends in the last two months or so?

We haven’t historically commenced about intra quarter Brian, on our performance on share repurchases, so we prefer to wait until end of June to comment on this particular quarters activities. We just have to draw the line somewhere.

Your next question comes from Robert Haley - Gabelli.

Looking at your acquisitions, RPG, Papyrus, can you talk just talk about the customer overlap you see there and the possible synergies from that?

There are some and I can’t tell you the percentage; I don’t know the percentage offhand. There are definitely some accounts where we sell into, RPG sells into and Papyrus does. There are also many that are separate. So, there could be some savings as it relates to the overlap, but it’s not 100% overlap.

How about the net change in headcount that you’re going to see? You’re getting rid of some of your retail stores, but taking on the wholesale operation?

Yes, that’s the plan that I had mentioned earlier; that we’re in the process of putting together and we don’t have any specifics that we’re ready to share yet.

Can you talk about your M&A strategy more generally; the recent acquisitions. Obviously you need traditional cards category and looking back a year or two, you did more digital focused M&A, with shots PhotoWorks? Is this a change in the vision of where you think the business is going?

No, I think it gets back to the comments real that will Steve had said, that when you look at the businesses that we’re looking to grow, we want to grow our core social expression businesses, which are the greeting cards and things that you would find; sort of a social expressions products out at retail and we want to grow our interactive business. That’s been the main thrust of growth that we’ve been looking for, for the last number of years. I think the way the market was going back two, three, four years ago, it was very difficult for us to get any acquisitions done, that we thought a sense to us and so we were more focused really. We did a little bit on the interactive side and the truth was we were more focused on our shares. I think more recently as opportunity to come up, we’ve been able to take advantage of them, but apparently the approaches change. It’s more that the market has shifted and then things then becoming more available, but I think our historical end, going forward strategy is going to be to grow our core card and social expression businesses and grow our interactive social expression businesses.

So, not necessarily any shift in focus between interactive versus core there?

No, not at all.

Just a few details, on the CapEx coming down year-over-year, could you talk about what is driving those savings?

We haven’t and don’t intend to share the specifics. As Zev said in his comments, tighten down both expense dollars as well as capital dollars across the corporation; much of what’s being reduced is in our North American Social Expressions segment.

Okay. Then on the working capital and deferred costs, I think you indicated that that should benefit cash this year? Can you talk about the components of that, maybe what are the big pieces that will be cash sources?

Again, we haven’t talked about the details. The combination of the two will be positive to cash flow, but we prefer not to get into line item by line item detail.

It appears that there are no further questions. Mr. Steinberg, I’d like to turn the call back to you for any final remarks.

Thank you, Deanna. That does conclude the question-and-answer portion of our conference today. We look forward to speaking with you again at our first quarter fiscal 2010 earnings conference call, which is anticipated to occur in late June. We thank you for joining us this morning.

Once again ladies and gentlemen, this concludes today’s conference call. Thank you for your participation.