Please standby. We’re about to begin. Good day, everyone. And welcome to the American Greetings Corporation First Quarter Fiscal 2011 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, Alicia. Good morning, everyone and welcome to our First Quarter Conference Call. I am Greg Steinberg, the company’s Treasurer and Director of Investor Relations. Joining me today on the call are Zev Weiss, our CEO and Steve Smith, our CFO. We released earnings for the first quarter of fiscal 2011 this morning. If you do not yet have our first quarter press release, you can find the copy within the Investor section of the American Greetings website at 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 forecast or estimates, and we do not plan to update any forward-looking statements. If you’d 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 main topics. First, I will share few thoughts on product leadership strategy. Second, I will comment on the status of the integration of both Recycled Paper Greetings and Papyrus into American Greetings. And finally, I will speak to our outlook for fiscal year 2011. Steve will then present more details behind our first quarter financial results. I’m pleased that our first quarter earnings per share of $0.75 were the highest we ever achieved in the first quarter. Our first quarter EPS benefited from solid performance in our core business units, the changes we made over the last 18 months to our portfolio businesses and the shares we repurchased over the past several years. We have made investments into our core greeting card business in an effort to distinguish ourselves in the marketplace and deliver great products to our customers. Over the past few quarters we have talked about a key component of this initiative, product innovation. The objective to continuously create distinct product is part of our product leadership strategy. Our product leadership goal is to create the best greeting card product in the industry. Achieving product leadership will attract more consumers to our product and help our retail partners grow their retail productivity. More specifically product leadership requires that we not only have the best product but that we also offer differentiated merchandising. In order to ensure we have the best product we continuously surveyed consumers, studied large quantities of sales data and test products to ensure we create greeting cards that offer a high degree of satisfaction to our consumers. Let me share with you a few examples of some of our recent products that appear to be enhancing the consumer experience. For younger more contemporary card…

Thanks, Zev. I have three components to my prepared remarks today. I will start with comments on a few larger items that impacted our consolidated financial results, then I will share a review of our reported segments, finally a quick walk through a few key components of our financial statements, we will then open the line for questions. Our consolidated revenue was down $17 million or 4% from last year’s first quarter revenue of $413 million, included in our $396 million of revenue was a benefit from foreign exchanges of $7 million versus the prior year’s first quarter. Additionally, since we sold our retail operations midway through the first quarter of last year, this year we did not have the benefit of the $12 million of revenue that occurred last year prior to the sale. So holding aside the foreign exchange impact, as well as, the sale of our retail operations, revenue was down about $12 million or about 3%. Our operating income of $55 million was up almost $33 million over the operating income of $23 million in the prior year’s first quarter. However, last year’s results included a loss of almost $35 million associated with our retail operations. Holding aside the loss from our retail operations last year our operating income was down about $2 million. Shifting now to review the reported segments and how they differ from the prior year’s results. Our North American segment’s revenues were down about $15 million or 4.6% versus the prior year’s first quarter, about 1.5% of the decrease was due to lower sales of party goods products. This decline was anticipated as part of the party goods transaction we announced this past December. The remainder of the decline was driven primarily by lower sales of seasonal greeting cards. A North American…

Thank you, sir. (Operator Instructions) We’ll go to Jeff Stein, Soleil Securities.

Okay.

Good morning, Jeff.

Good morning, guys. A few questions. First of all, topline. Steve, I think I heard you say that there was a currency gain in the first quarter, is that correct?

Yeah, Jeff. We picked up about $7 million of favorable FX benefits.

Okay. And the effect of RPG and Papyrus, net of one-time integration costs, was it positive, negative or neutral?

You’re speaking to revenue or earnings, Jeff?

To earnings.

The benefit is positive on an operating basis alone but if you include the integration costs, it is several million dollars negative.

Okay. And the $3 million, then, I think you alluded to that number several times. Would that represent the integration expense you incurred during the quarter?

It would include that, yeah.

So that would suggest that -- that charges will probably increase in magnitude over the balance of the year?

Actually charges won’t increase -- they should be roughly in line with what we experience are coming down, now. We had some charges that were put on the balance sheet as a result of the -- the opening balance sheet and purchase accounting. We had charges that were occurring last year and some of the first quarter and then there is a bit of a tail here during the balance of the quarter of this fiscal year.

So of the -- let’s call it $20 million of integration expenses, how much of that gets capitalized and how much of that is run through the profit and loss statement?

Only about a quarter was capitalized. Three quarters were run through the P&L.

Got it. Okay. And the healthcare expense that you booked during the first quarter of the 1.6 million…

Right?

…is that a one-time event or will it repeat in subsequent quarters?

It is a one-time event although we haven’t -- we’re not fully aware nor is anybody, really, all of the effects of the new healthcare laws but what we’re aware of, it is hitting us right now on the tax line.

Okay. And one final question and then I’ll get back in queue and let someone else talk. How should we think about the effect of the party goods transaction on revenues on a go-forward basis? In other words, are you going to recapture any of that revenues that you gave up through the distribution agreement that you have signed with Amscan or are we looking with sort of a negative $40 million compare year-on-year?

Maybe that I can answer and then you can add some additional thoughts. Jeff, just to be clear, I’m not sure we were clear on the last quarterly call. So I apologize if we were not. The $40 million is the delta rather than the absolute period on period. So we’re looking at something in the neighborhood of round numbers and it is a little bit seasonal but roughly $10 million of negative impact on revenues quarter on quarter for this fiscal year.

Got it. Okay. That is very helpful.

Does that give you your answer?

Yeah.

Okay. Good.

Thank you very much, guys.

Thanks, Jeff.

(Operator Instructions) We’ll go to Mimi Noel of Sidoti & Company.

Good morning, Mimi.

Good morning. Just one question, so far. Can you talk a little bit about the weakness that you think is largely reflective of the macroeconomic environment, how you’ve seen trends shift at all? Are they looking more promising? Is there any reason why you would be less optimistic than you were at the end of 4Q?

I think if you just look at retail sales number that are public, it does feel like things could be softening a bit. And I think what we’re seeing is that it is inconsistent. Just as what you would see with the published retail sales numbers. I think as the economy is getting better, some retailers are doing fine and for others it is a bit more choppy, where some months they’re up and some months they’re down. And I think that’s what we’re observing, as well.

Are you seeing any -- any consistency between channels and the trends just within the channels?

You know, a lot of what our sales rely on is retailer traffic. And you know when people come into the stores and they’re walking by our display are particularly around seasonal, but on everyday as well, we see a difference. And so as you look at what’s happening in general with traffic in retail, I think you would actually see probably what is going on for us, as well. And so as, you know, folks are may be rethinking where their traffic is going to go in terms of retail stores, we get affected by that.

And since the comparisons become stiffer as you work your way through the year, is it possible that your core sales declines could weaken as the company progresses through its fiscal year?

You know, obviously there is no way for us to know at this point. I think if you look at the plans that we have in place for the back half of the year we feel very good about them. And it’s going to come down to if we get the traffic in the stores, I think we’re going to be fine. And I think it has a lot to do with how we see traffic affecting sales in the future.

And those plans for the back half of the year, I know you’re going to be very busy with integration but can you characterize those plans?

I just think as we were gearing up for the holiday season, I just think when you look at what we’ve got from a product perspective around the innovation work that we talked about and the new product launches as well as just the refreshes that we’re doing within our line. I think we’ve got a very strong line and it’s going to come down to how well it performs and how many people we get into the store to look at our displays and I think when we get that traffic, I think we’re going to be fine.

One additional question, have you given any more -- have you given any further thought to expand distribution of the RPG and Papyrus cards?

Well, I think when we think about it a lot and we think that there is a lot of opportunity, that there is a strong demand for, you know, for what both of those brands represent whether it’s the retailers who are looking for a stronger humor program or a more sophisticated customer that they’re hoping to attract with Papyrus. And we’re -- we continue to get very strong demand for both of those brands throughout the industry. And so I think we feel like there is still like a lot of opportunity there.

Okay. And that’s something that you’re willing to explore. You’re not hyper-protective about the brands to something you would not wanting to increase distribution.

I think what we want to do is we want to maximize the brands to their full potential and it doesn’t mean that you put them everywhere because they’re not appropriate everywhere. And at the same time, we think there are still a lot of opportunity for both of those brands.

Okay. Thanks for your time.

All right. Thanks, Mimi.

(Operator Instructions) and we’ll go to Jeff Stein of Soleil Securities.

Zev, just kind of wondering, putting RPG and Papyrus under one corporate umbrella. How does that change the cost structure or anything else relative that you had envisioned recently?

Not -- I think it is very much in line with what our plans were. So it’s not like it’s a new thing for us. And that was part of what -- when we talked about overall expectations for those two businesses that was included in it. And I think what you’re seeing is that the creative and product processes are very -- are still very much intact and if anything we’ve invested more into them. And we’ve taken areas like -- again, the back office, the distribution, maybe even some of the sales and marketing functions and so the back office piece fits very well into what AG was doing and then we combined some of their sales and marketing effort. And our feeling is that it gives us more focus and strength and it allows us to invest in the product where we think we’re going to make difference with your customers.

Got it. If you guys are successful in cross-selling the product and selling it into accounts that previously did not carry RPG or Papyrus, does that -- is there a trade-off one for one in terms of what it’s replacing on the shelf or have you been or do you think you can be successful in increasing the amount of shelf space that your customers dedicate to their greeting card displays?

I think it’s both. I think when you look at the productivity of RPG and Papyrus and we’ve seen this over and over again, we think we could drive productivity. So you actually get a net increase, particularly when we do it right. And on top of that we think we can expand footage throughout the industry. We think we can expand footage by continuing to let those brands get the utilization that we think that they could have. We don’t think that they’re -- they’re as exposed as they need to be and could be in the industry. And at the same time, we want to be putting them in the right place, but we still think there is a lot of opportunity to grow footage as well as increased productivity within existing footage.

Okay. And I’ve been doing some store checks and I mean, your product really does look great but it’s difficult to understand or just by observing what percent of your product might be new versus the prior year. So I’m just kind of curious, do you kind of look at -- I presume you do look at product newness as one of the drivers and kind of curious what percent of your product you would kind of classify as new on the shelf versus the prior year?

Yeah. It is something that we look at. It is not something that we share publicly. I think that we continue to feel comfortable that the amount that we’re offering is new. The amount of new that we’re offering is the appropriate amount. And I think that’s been so for a number of years. I think just we continue to feel like the quality of the innovation that’s coming out throughout the lines continues to get better and better. And so it is not so much the amount of new, I think it is the quality of what is being done that just every year I continue to be amazed by, you know, what our organization is putting out.

Great. And final question, can you comment on potential to see further improvements in yield, kind of what, you know, what inning are you in, as they say?

I think we made tremendous strides in yield. And I think it’s going to be the kind of thing where I think it will be years, where every year we’ll continue to try to get better and better and make incremental changes -- incremental improvements from where we are. So I don’t know what inning we’re in. I can’t tell you that. The last 12 to 18 months we saw significant improvements. I think we’re now moving into incremental improvements and I think you’re going to see us be very vigilant on that and throughout all of our business for this year. And I think it will happen for the next few years. And so our hope is to continue to see benefit. It won’t be as big as it was maybe last year but I think that there is many years of incremental benefit ahead of us.

Okay. And any comment on kind of what’s going on in the U.K.? Your profits were up a little bit, but from your vantage point, is the environment getting better, worse or about the same?

You know, it’s on -- I think it’s definitely better. There is no question it’s better. I don’t think we’re feeling like the overall, you know, consumption levels in general in the U.K. are -- where we would like them to be and this is just in general in retail. However, when I look at what’s happening in the business, I think we’re seeing a lot of progress. And I think they’re doing a very good job at, again, producing great product and taking care of their customers. And as a result I think we’re seeing some good performance there. I don’t think that our folks there believe that the economy is as robust as they would like it to be.

Got it. Okay. Thanks a lot.

Okay. Thanks, Jeff.

We’ll go next to Keith Curtis of Brant Point Capital.

Yeah. Could you guys comment on potential uses of free cash flow? Thanks.

Our view on that is probably pretty consistent with how we have felt about it in the past. And that first we’re going to look for organic growth opportunities and wherever there is good organic growth opportunities that we feel highly confident about, we feel those are areas we ought to make an investment in. And then at the same time, we want to make sure our balance sheet remains, I think, very conservative and gives us opportunity to execute if we ever need to do something that we have the flexibility to do that. But I think our bias in general has been to have a conservative balance sheet. And after that we really look at a few things. On the one hand, we don’t think it is a bad thing to have some cash on hand to maintain flexibility. And then we’re also -- we’ll look at opportunities to return cash to shareholders, which we’ve, I think done quite a bit of in the past. And we look at all share buy-backs and dividends as opportunities to do that.

Could you just characterize what you mean by a conservative balance sheet? The company doesn’t seem particularly levered up at this point. So just -- could you define that by more specific parameters and kind of targeted leverage ratios?

No. That’s not anything that I would look to share over the phone but what I say is that if you look at our practices over the last three or four years and last year we made a number of moves. So we probably got a little bit more aggressive last year. But if you look in general where we are now and where we’ve been over the past few years, I think that is probably a good guide for where we’d like things to be in the future.

Okay. Thank you.

Thanks, Steve.

(Operator Instructions) With no further questions, I’ll turn the conference back to Mr. Steinberg.

Thank you, Alicia. That concludes the question-and-answer portion of today’s conference call. We do look forward to speaking with you again at our fiscal year 2011 second quarter conference call which will be in late September. We thank you for joining us this morning.

That concludes today’s conference call. Thank you for your participation.