Good day and welcome to the American Greetings Corporation first quarter 2010 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.

Good morning everyone and welcome to our first quarter conference call. I’m Gregory Steinberg the company’s Treasurer and I help manage our Investor Relations. 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 first quarter fiscal 2010 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 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 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.

Thank you Greg and good morning everyone. Today I’ll cover three broad topics. First I will share with you our fiscal 2010 first quarter results, second I will speak about the recent strategic moves we made to strengthen our business model by further focusing on our core business, and third, I will share a few directional comments on our outlook for fiscal year 2010. Steve will then present more details behind our first quarter performance. I’m very pleased with our first quarter performance as sales of greeting cards held constant despite the economy. If you include the acquisitions we made, our card sales improved more than 6% over the prior period. And holding aside the charge we recognized for the sale of our retail business, earnings are substantially higher than the first quarter of last year. As many of you know we have spent a lot of time and effort investing in our leadership position in the greeting card category. In addition we have been focused on improving the mix of cards on retailer shelves to meet the consumers’ changing desires. We believe that we are continuing to see the benefits of our hard work in those investments. Our operating earnings benefited from a combination of both improved yields and last year’s overhead efficiency efforts. As you may recall in the past few quarters we spoke about our unacceptable sales yield, meaning we had not appropriately calibrated the supply chain for the optimal level of production needed to maximize sales. We committed to be both more vigilant in managing our supply chain and to lower our overhead. On both commitments the organization delivered, at least for this one quarter. Within the supply chain we handled the volumes more deftly to their shipments, better [master of sales] and therefore our distribution…

Thanks Zev, I have three components to my prepared remarks today. I will start with some comments on a few large items that impacted our consolidated results this quarter, then I will share a 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 2009 fourth fiscal quarter. Then during our 2010 first fiscal quarter we sold our retail operations business and acquired the Papyrus brand and its related wholesale distribution. Results of RPG and Papyrus are included in our North American social expression segment. Our consolidated revenue was down $15 million from last year’s first quarter or 3.6%. However included in our $413 million of revenue was the adverse impact from foreign exchange of $24 million versus the prior year’s first quarter. So, holding aside the foreign exchange impact, revenue was up about $9 million which is slightly above 2%. I would note that the revenue loss due to the divestiture of the retail business was essentially offset by the revenue additions from the RPG and Papyrus acquisitions. Our operating income of $22.6 million was up slightly over the operating income of $22.2 million in the prior year’s first quarter. However this year’s results included a preliminary charge of just over $28 million associated with a non-cash loss on the disposition of our retail operations. Holding aside the loss on our retail operations, our operating income improved about $29 million versus the prior. Recall that the prior year’s first quarter included a $10 million drag on earnings from the rollout of our Canadian product line. So, net of the current year loss on the sale and the…

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

Great quarter, all things considered, great quarter. A question regarding your integration expenses on RPG and Papyrus, you didn’t specifically address that. It seems that most of that swing on the other expense line was related to the loss on the sale of the retail operations, can you talk about the magnitude of integration expenses and what may lie ahead for the balance of the current fiscal year.

You’re not going to see much in the first quarter as it relates to the integration costs. It will come clearly within the back half of this year and it may also come into next year. We’re not yet prepared to talk about what those look like, when exactly they’ll happen or what the size is. The teams are pretty actively working on their plans and so there’s nothing we can share yet.

Have you baked that into your guidance on free cash flow for the year.

There hasn’t been any of the effect of the transactions on the guidance of the free cash flow.

And can you talk a little bit about what’s going on in the greeting card business in terms of your comp door sales. It sounds like your wholesale business excluding acquisitions was relatively flat if I’m reading it correctly and could you comment on what channels are the strongest and what channels are showing the weakest increases at this point, or decreases.

What I would say in general is that we had a pretty solid quarter as it relates to card sales and in light of what’s happening in general with retail we felt pretty good about that. I wouldn’t get into specifics around channels. Obviously we are affected by traffic and so if you look at in general what’s happening with comp store sales, often you’ll see some correlation to what’s going on with comp store sales and traffic and therefore traffic and then card sales. And that’s probably the best guide that you might want to use as you look at what’s happening in general.

We are seeing geographically more strength in the North American market then we are seeing internationally particularly over in the UK.

If you could talk about the issue of scrappage, in reading through the 10-K it looks like your scrappage was up about $19 million year on year, and you did call that out in first quarter as being an area of improvement and I’m wondering are you targeting any specific dollar level of improvement year on year that we may look for to be a favorable swing in the model this year.

What we’re doing is, scrappage comes from a lot of different areas so it’s not just from one area and what we do is we’ve obviously been very specific with the organization by area of what they need to do and for the first quarter they’ve been following through on that. But it’s nothing that we’re aggregating and then sharing publicly in terms of a line item for the plan for this year.

And can you talk a little bit about, you mentioned also about supply chain improvements, is there anything from a system standpoint that you’re doing to better manage and match supply relative to demand or is it just more of an execution issue or has it been an execution issue that you’re just addressing more closely at this point.

It’s mostly execution, there is some system support in what we’re doing. But I would think its more execution oriented then systems oriented.

Your next question comes from the line of Mimi Noel – Sidoti & Company

Following up on Jeff’s question regarding channel strength, weaknesses, etc. what kind of break up there, how are your margins across all channels. Are they fairly consistent or should we take some sort of migration into consideration when making margin assumptions in our model.

It’s a good question but we don’t get into that in terms of from a public perspective and so it’s not something that we’re looking to share.

Okay and nothing along qualitative feedback either.

It’s just not the kind of thing we’re looking to share in this kind of a forum. It is a good question and obviously these kinds of things do matter, but nothing that we’re looking to share.

Your next question comes from the line of Mike Hughes – Delaware Investments

I was just wondering if you could expand on your comments on the year over year growth in AR, I think you said about two thirds was from improved sell through so there were fewer sales credits, so does that actually improve the gross margins, meaning is it possible that the large portion of the year over year earnings growth in the expressions business was because of the sales credit number was reduced.

No, that would not imply that. Just a little context for you on AR versus prior periods, in particular two and three years ago just to elaborate a bit. First if you look at AR in an absolute level versus two or three years ago, right in line and if you look at this year’s performance versus prior, it’s more of a reflection of allowances in prior year due to some returns then it is performance this fiscal first quarter.

The sales credit at a lower level does not help the margins.

No, not at this time.

Can you just walk through how the accounting works for the sales credit, maybe I don’t think I follow how it works.

Sure we’d be glad to do that with you if you’d like offline.

Your next question is a follow-up from the line of Jeff Stein - Soleil Securities

Question on the tax benefits from the RPG transaction, given the 41% rate in the first quarter doesn’t look like much if any of that tax benefit flowed through, is that correct and can you talk about how much of that tax benefit may flow through this year.

You’re correct in your assumption on the first quarter, there will be some. We discussed last quarter that there would be some benefit, tax benefit attributed to fiscal 2010 due to the transaction. We said it was a fairly small amount and it will be likely still to be a small amount. It’s spread out over a number of years, more than half a dozen, as a result of the way that we treat the benefits but it’s not a significant number first quarter or in this fiscal year.

Looking at your greeting card sales, can you talk about price growth and unit growth during the quarter, it sounds like based on your last quarter’s comments there was kind of a barbell effect. You’re adding more technology cards on the high end, there’s growth in the dollar stores on the low end and the two about neutralized the other, if that’s still the case as you look at Q1.

It is, very high level because we’ll be giving some of this information in our Q which we file in about a week, right after the fourth. What you’re seeing in overall, this is globally, you’re seeing the total dollars in cards roughly flat despite the weakness in the economy. You’re seeing pieces as we did last year down slightly with price mix up, price mix up fundamentally the result of the barbell effect that you spoke to.

And with regard to the share count, your shares dropped year on year because of the buyback, what was the actual share count at the end of the quarter.

It was about 39.5 million.

So that is the average, so the actual is also about the same.

Yes it is. The actual is just a shade under the average for the quarter.

And I noticed in doing some store checks that you, at least it seems like you’re coming out with some expanded lines of your tech cards, there were some talking character cards that I noticed on an end cap in one of the drugstore chains you serve, is this something that, is it more than just a test or is this a new line that’s being rolled out across the business.

I think we talked about, at the last call that there’s a whole bunch of innovation product that you’re going to see coming out and its going to be more than just music and what you’re seeing for the summer program which is a number of different new products, that we are very excited about and that follows what we did for Father’s Day, actually there were a number of new products in the Father’s Day set that we were very excited about. And it’s just part of what we’re doing in terms of creating the innovative product and some of the investments that we’ve made in innovative product that we’ve been speaking about. So it’s just a continuation of what we’ve been talking about and what you’ll be seeing in the future.

And would it be fair to say that most of this innovation is going to be coming in the technology card segment.

It’s going to be all over the place. It won’t just be in technology. It’ll be in, both from content perspective and formats and some of those formats include technology and some of them do not.

You addressed some credit quality issues in the UK, are you noticing any uptick in credit quality issues domestically.

I think in general people feel better domestically then they did maybe three months ago or six months ago, but it’s so hard to know until you get through things. So it feels better but I think we’ll know more in the next three, six or nine months.

Your next question comes from the line of Richard Greenberg – Donald Smith & Company

I was wondering if you could prioritize the $70 million of free cash flow. I know you may not want to be too specific but just in general, do you think that’s going to be used more for investing in the business, for stock buyback, possible debt reduction, where do acquisitions, future acquisitions fit, just a general discussion of the use of that money.

We haven’t shared anything in terms of the direction that we’re going with that so I think we’ll apply the same philosophy that we’ve done historically which is we’ll look at all of our options, whether it’s making some strategic bets and obviously we just made a number of them so that’s been a very aggressive thing for us. So we’re going to be thoughtful about what we might do going forward but we’ll look at strategic bets in terms of acquisitions and then we’ll look at either returning cash to shareholders, whether that’s in buybacks or dividends, or reducing debt. And I think at this point we’re very early in the year so it’s hard to make those calls before the money comes in but then when it does, I think we’ll have to look at all of our choices and then figure out what we think is the best thing to do and then we’ll do that. But we haven’t shared anything beyond that.

You’ve clearly leveraged up the company substantially more than a couple of years ago. You’re at over $400 million in debt right now, how do you feel about that. Are you comfortable with that level of debt or would you like to start to bring it down again.

I think we’re comfortable with the current level of debt. In general our philosophy from a debt perspective has been to be relatively conservative and I don’t think our philosophy has changed. And so some of that debt is the result of some of the moves that we made in the last 12 months and so we’ll see how things play out. It’s not that we’re uncomfortable with where we’re at, but in general we like to be conservative.

Your next question comes from the line of Jim Davis – Unspecified Company

Just a short follow-up on the accounts receivable, and yield and scrap issues that you talked about, how do you feel about the just the sustainability of this level of scrap and yield in your business and is there still much room for improvement here or is it operating at a pretty optimal level right now.

It’s only been a quarter, so it’s hard to say. I don’t feel like we’re operating at an unsustainable level. I think that this is something that we should be able to sustain and improve upon as we go forward.

And if, do you have any context on relative to the pretty giant leap you took this quarter, how much room for improvement there may be in coming periods.

I think if you look at the way we’ve operated historically, go back a number of years, we’re not doing anything now that’s unusual for with the way we’ve operated historically. And there’s still room for improvement and still be within the range of the way we’ve operated historically. So it just tells you that this is sustainable, it should be sustainable, and it should be able to be improved upon.

Your next question comes from the line of Lee Atzil – Broadway Gate Capital

First I’m sorry to focus on this, maybe I would hope this is appropriate for here for this call, but the receivable issue something I’m not clear on, generally speaking as you move to more scanned based trading, shouldn’t receivables decline over time.

Yes, that’s correct. They would typically decline over time. Again back to the earlier question, let’s try to help illuminate that a bit more, if the total shipments are down and our credits were down [inaudible] the net effect of that is basically zero on the P&L in the quarter and so that’s the point of focus really ought to be prior years other than last year’s first fiscal and comparing this year’s first 2010 to 2008 and 2007. If you look back at that you’ll see a fairly normal pattern.

And of the $70 million free cash flow which is a great number for this year, what would be the tax benefit. I see this quarter deferred tax was I think $17 million or so benefit, what do you expect the tax benefit to be.

We typically don’t get into forecasting taxes as far as benefits. And again back to the earlier question we have very little tax benefits associated if you’re thinking with the transactions in this quarter.

As you build up the $70 million you obviously have an assumption there for, I’m just wondering if is it a significant number, an insignificant number or maybe a drag, deferred tax, your expectation is part of the free cash flow this year.

We used our normalized effective tax rate in the buildup of that $70 million. There was no extra assumptions for that, to get to that $70 million figure.

You’re assuming no benefit from deferred taxes this year, for free cash flow.

To get to that $70 million, it’s about our effective tax, average effective tax rate.

As we try to model your business going forward there is significant change both from selling, getting out of a lower margin retail business, and also the two acquisitions, RPG and Papyrus, how we can thing of margins in the next three years. Obviously should be higher than where they are now, is there a way to think about what levels they are or is Papyrus, RPG, are they higher margin, same margin, as your North American social expressions. Any way to think about that.

I think the best way to look at it is to look at what we shared as the run rate impact on operating income of the two transactions which we said in the my script, we said that that was an improvement of $15 million and then you could add to that what you may have modeled the performance of retail and then I think that’s probably the best way to look at it going forward.

And in terms of, so its $50 million of income, what would be the revenue normalized impact from these two transactions.

So what we said was the combination of the two of the additions of RPG and Papyrus and then subtract out retail, was a net reduction of sales of about $40 million.

But excluding retail, because you talked about a normalized $15 million contribution from these two acquisitions, so what would be the revenue contribution of these.

It would tell you the revenue contribution of the two is around $120 million.

Your next question comes from the line of Robert Haley - Gabelli

Just following up on that with RPG and Papyrus, over time what is the opportunity to increase distribution of those through your system and grow the top line.

Obviously when we looked at these acquisitions we felt like on the one hand they were savings but perhaps even more importantly there was opportunities to grow the top line. And so it’s something that we are very focused on and hopeful for as we look forward. So I think you’re hitting on something that we agree with. These are very powerful and strong brands and they’ve got the opportunity to be extended in the marketplace.

Is it fair to say that in the short-term you’re more focused on costs and longer-term the focus would shift increasingly to distribution and top line.

No I think it’s actually equal in terms of the focus. We don’t forecast a lot of revenue increases so it’s not the kind of thing that we would give you in terms of, here’s what we would expect and I would consider that to be upside. In terms of how we’re executing I’d say we’re very focused on both and we remain very focused on the product line and on the consumer and on our customers to make sure we’re growing sales.

You can see we’re focused on both, the effect of the effort is for visible sooner with our efforts on synergies. The revenue side of it comes at a later date.

With your outlook for the full year, down 2% on the core business, what’s the currency impact you’re baking in there.

For the full year we haven’t forecasted currency impact.

Is there any update you can give on the Strawberry Shortcake Care Bears IPs.

There really is no updates, I mean we continue to be in litigation and we’re not looking to comment on that litigation in this forum.

Your next questions comes from the line of Brian Courville - Mentor Partners

Did you buyback any debt in the quarter.

No we did not.

Were you offered any in [past].

We can’t comment on the efforts behind the scenes.

There are no additional questions at this time; I would like to turn it back over to management for any additional or closing comments.

That does conclude the question-and-answer portion of our conference call today. We look forward to speaking with you again at our second quarter fiscal 2010 earnings conference call which is anticipated to occur in late September. We thank you for joining us this morning and that concludes today’s call.