10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One) 

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended May 27, 2011

OR 

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file number 1-13859

AMERICAN GREETINGS CORPORATION

(Exact name of registrant as specified in its charter)

Ohio	34-0065325
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
One American Road, Cleveland, Ohio	44144
(Address of principal executive offices)	(Zip Code)

(216) 252-7300
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ Accelerated filer o 
Non-accelerated filer o
(Do not check if a smaller reporting company) Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No þ

As of July 1, 2011, the number of shares outstanding of each of the issuer’s classes of common stock was:

Class A Common	37,867,369
Class B Common	2,802,513

AMERICAN GREETINGS CORPORATION
INDEX

		Page
		Number
PART I — FINANCIAL INFORMATION
Item 1.	Financial Statements		3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		23
Item 4.	Controls and Procedures		23
PART II — OTHER INFORMATION
Item 1.	Legal Proceedings		24
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		25
Item 6.	Exhibits		26
SIGNATURES			27
EXHIBITS
EX-10.1
EX-10.2
EX-31.A
EX-31.B
EX-32
EX-99.1
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

AMERICAN GREETINGS CORPORATION
CONSOLIDATED STATEMENT OF INCOME

(Thousands of dollars except share and per share amounts)

	(Unaudited)
	Three Months Ended
	May 27, 2011			May 28, 2010
Net sales	$	396,776		$	392,105
Other revenue		5,573			4,203
Total revenue		402,349			396,308
Material, labor and other production costs		157,929			158,013
Selling, distribution and marketing expenses		123,292			117,551
Administrative and general expenses		65,298			66,032
Other operating income — net		(923	)		(594	)
Operating income		56,753			55,306
Interest expense		6,124			6,202
Interest income		(321	)		(213	)
Other non-operating expense (income) — net		160			(1,700	)
Income before income tax expense		50,790			51,017
Income tax expense		18,197			20,178
Net income	$	32,593		$	30,839
Earnings per share — basic	$	0.80		$	0.78
Earnings per share — assuming dilution	$	0.78		$	0.75
Average number of shares outstanding		40,500,357			39,638,568
Average number of shares outstanding — assuming dilution		41,799,366			40,849,429
Dividends declared per share	$	0.15		$	0.14

See notes to consolidated financial statements (unaudited).

3

AMERICAN GREETINGS CORPORATION
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Thousands of dollars)

	(Unaudited)			(Note 1)			(Unaudited)
	May 27, 2011			February 28, 2011			May 28, 2010
ASSETS
Current assets
Cash and cash equivalents	$	211,139		$	215,838		$	186,775
Trade accounts receivable, net		137,213			119,779			110,085
Inventories		203,346			179,730			157,913
Deferred and refundable income taxes		46,686			50,051			74,951
Assets held for sale		7,180			7,154			14,680
Prepaid expenses and other		117,315			128,372			118,046
Total current assets		722,879			700,924			662,450
Goodwill		29,701			28,903			30,238
Other assets		431,472			436,137			413,237
Deferred and refundable income taxes		127,731			124,789			150,207
Property, plant and equipment — at cost		859,189			849,552			835,707
Less accumulated depreciation		616,706			607,903			597,610
Property, plant and equipment — net		242,483			241,649			238,097
	$	1,554,266		$	1,532,402		$	1,494,229
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Debt due within one year	$	—		$	—		$	99,000
Accounts payable		98,641			87,105			80,205
Accrued liabilities		65,527			59,841			61,425
Accrued compensation and benefits		35,163			72,379			35,472
Income taxes payable		18,752			10,951			25,390
Other current liabilities		100,107			102,286			91,878
Total current liabilities		318,190			332,562			393,370
Long-term debt		233,298			232,688			230,973
Other liabilities		186,484			186,505			179,643
Deferred income taxes and noncurrent income taxes payable		32,132			31,736			30,548
Shareholders’ equity
Common shares — Class A		37,942			37,470			37,064
Common shares — Class B		2,803			2,937			2,926
Capital in excess of par value		502,131			492,048			478,676
Treasury stock		(951,643	)		(952,206	)		(951,830	)
Accumulated other comprehensive income (loss)		2,121			(2,346	)		(40,257	)
Retained earnings		1,190,808			1,171,008			1,133,116
Total shareholders’ equity		784,162			748,911			659,695
	$	1,554,266		$	1,532,402		$	1,494,229

See notes to consolidated financial statements (unaudited).

4

AMERICAN GREETINGS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Thousands of dollars)

	(Unaudited)
	Three Months Ended
	May 27, 2011			May 28, 2010
OPERATING ACTIVITIES:
Net income	$	32,593		$	30,839
Adjustments to reconcile net income to cash flows from operating activities:
Stock-based compensation		2,662			2,650
Net loss (gain) on disposal of fixed assets		86			(151	)
Depreciation and amortization		9,929			10,294
Deferred income taxes		1,147			(535	)
Other non-cash charges		872			735
Changes in operating assets and liabilities, net of acquisitions:
Trade accounts receivable		(12,389	)		19,576
Inventories		(18,750	)		4,483
Other current assets		2,442			(2,878	)
Income taxes		7,596			15,830
Deferred costs — net		13,099			13,802
Accounts payable and other liabilities		(27,922	)		(66,362	)
Other — net		597			4,256
Total Cash Flows From Operating Activities		11,962			32,539
INVESTING ACTIVITIES:
Property, plant and equipment additions		(8,891	)		(5,965	)
Cash payments for business acquisitions, net of cash acquired		(5,992	)		—
Proceeds from sale of fixed assets		24			555
Proceeds from escrow related to party goods transaction		—			24,523
Total Cash Flows From Investing Activities		(14,859	)		19,113
FINANCING ACTIVITIES:
Net decrease in long-term debt		—			(250	)
Sale of stock under benefit plans		12,000			19,087
Purchase of treasury shares		(9,942	)		(12,979	)
Dividends to shareholders		(6,062	)		(5,525	)
Total Cash Flows From Financing Activities		(4,004	)		333
EFFECT OF EXCHANGE RATE CHANGES ON CASH		2,202			(3,159	)
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(4,699	)		48,826
Cash and Cash Equivalents at Beginning of Year		215,838			137,949
Cash and Cash Equivalents at End of Period	$	211,139		$	186,775

See notes to consolidated financial statements (unaudited).

5

AMERICAN GREETINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Three Months Ended May 27, 2011 and May 28, 2010

Note 1 — Basis of Presentation

The accompanying unaudited consolidated financial statements of American Greetings Corporation and its subsidiaries (the “Corporation”) have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary to fairly present financial position, results of operations and cash flows for the periods have been included.

The Corporation’s fiscal year ends on February 28 or 29. References to a particular year refer to the fiscal year ending in February of that year. For example, 2011 refers to the year ended February 28, 2011.

These interim financial statements should be read in conjunction with the Corporation’s financial statements and notes thereto included in its Annual Report on Form 10-K for the year ended February 28, 2011, from which the Consolidated Statement of Financial Position at February 28, 2011, presented herein, has been derived. Certain amounts in the prior year financial statements have been reclassified to conform to the 2012 presentation. These reclassifications had no material impact on financial position, earnings or cash flows.

The Corporation’s investments in less than majority-owned companies in which it has the ability to exercise significant influence over the operation and financial policies are accounted for using the equity method except when they qualify as variable interest entities (“VIE”) and the Corporation is the primary beneficiary, in which case, the investments are consolidated. Investments that do not meet the above criteria are accounted for under the cost method.

The Corporation holds an approximately 15% equity interest in Schurman Fine Papers (“Schurman”), which is a VIE as defined in Accounting Standards Codification (“ASC”) topic 810, (“ASC 810”) “Consolidation.” Schurman owns and operates approximately 430 specialty card and gift retail stores in the United States and Canada. The stores are primarily located in malls and strip shopping centers. During the current period, the Corporation assessed the variable interests in Schurman and determined that a third party holder of variable interests has the controlling financial interest in the VIE and thus, the third party, not the Corporation, is the primary beneficiary. In completing this assessment, the Corporation identified the activities that it considers most significant to the future economic success of the VIE and determined that it does not have the power to direct those activities. As such, Schurman is not consolidated in the Corporation’s results. The Corporation’s maximum exposure to loss as it relates to Schurman as of May 27, 2011 includes:

• the investment in the equity of Schurman of $1.9 million;

• the Liquidity Guaranty of Schurman’s indebtedness of $12 million;

• normal course of business trade accounts receivable due from Schurman of $12.3 million, the balance of which fluctuates throughout the year due to the seasonal nature of the business;

• the operating leases currently subleased to Schurman, the aggregate lease payments for the remaining life of which was $32.0 million, $36.0 million and $46.3 million as of May 27, 2011, February 28, 2011 and May 28, 2010, respectively;

• the subordinated credit facility (the “Subordinated Credit Facility”) that provides Schurman with up to $10 million of subordinated financing.

The Corporation provides Schurman limited credit support through the provision of a Liquidity Guaranty in favor of the lenders under Schurman’s senior revolving credit facility (the “Senior Credit Facility”). Pursuant to the terms of the Liquidity Guaranty, the Corporation has guaranteed the repayment of up to $12 million of Schurman’s borrowings under the Senior Credit Facility to help ensure that Schurman has sufficient borrowing availability

6

under this facility. The Liquidity Guaranty is required to be backed by a letter of credit for the term of the Liquidity Guaranty, which is currently anticipated to end in January 2014. The Corporation’s obligations under the Liquidity Guaranty generally may not be triggered unless Schurman’s lenders under its Senior Credit Facility have substantially completed the liquidation of the collateral under Schurman’s Senior Credit Facility, or 91 days after the liquidation is started, whichever is earlier, and will be limited to the deficiency, if any, between the amount owed and the amount collected in connection with the liquidation. There was no triggering event or liquidation of collateral as of May 27, 2011 requiring the use of the guaranty.

The Subordinated Credit Facility that the Corporation provides to Schurman has an initial term of nineteen months, subject to up to three automatic one-year renewal periods (or partial-year, in the case of the last renewal), unless either party provides the appropriate written notice prior to the expiration of the applicable term. Schurman can only borrow under the facility if it does not have other sources of financing available, and borrowings under the Subordinated Credit Facility may only be used for specified purposes. Borrowings under the Subordinated Credit Facility are subordinate to borrowings under the Senior Credit Facility, and the Subordinated Credit Facility includes affirmative and negative non-financial covenants and events of default customary for such financings. As of May 27, 2011, Schurman had not borrowed under the Subordinated Credit Facility.

The April 2009 transaction with Schurman also included a $12 million limited Bridge Guaranty in favor of the lenders under the Senior Credit Facility, which remained in effect until Schurman was able to include inventory and other assets of the retail stores it acquired from the Corporation in its borrowing base. As previously disclosed in the Corporation’s Annual Report on Form 10-K for the year ended February 28, 2011, on April 1, 2011, the Bridge Guaranty was terminated.

In addition to the investment in the equity of Schurman, as previously disclosed in the Corporation’s Annual Report on Form 10-K for the year ended February 28, 2011, the Corporation holds an investment in the common stock of AAH Holdings Corporation, Amscan’s ultimate parent Corporation. These two investments, totaling approximately $12.5 million, are accounted for under the cost method. The Corporation is not aware of any events or changes in circumstances that had occurred during the first quarter of 2012 that the Corporation believes are reasonably likely to have had a significant adverse effect on the carrying amount of these investments.

Note 2 — Seasonal Nature of Business

A significant portion of the Corporation’s business is seasonal in nature. Therefore, the results of operations for interim periods are not necessarily indicative of the results for the fiscal year taken as a whole.

Note 3 — Recent Accounting Pronouncements

In January 2010, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2010-06 (“ASU 2010-06”), “Improving Disclosures about Fair Value Measurements.” ASU 2010-06 provides amendments to ASC Topic 820, “Fair Value Measurements and Disclosures,” that require separate disclosure of significant transfers in and out of Level 1 and Level 2 fair value measurements in addition to the presentation of purchases, sales, issuances, and settlements for Level 3 fair value measurements. ASU 2010-06 also provides amendments to subtopic 820-10 that clarify existing disclosures about the level of disaggregation, and inputs and valuation techniques. The new disclosure requirements are effective for interim and annual periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements of Level 3 fair value measurements, which become effective for interim and annual periods beginning after December 15, 2010. The Corporation’s adoption of this standard did not have a material effect on its financial statements.

In May 2011, the FASB issued ASU No. 2011-04 (“ASU 2011-04”), “Fair Value Measurement: Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.” ASU 2011-04 improves comparability of fair value measurements presented and disclosed in financial statements prepared with U.S. generally accepted accounting principles and International Financial Reporting Standards. ASU 2011-04 clarifies the application of existing fair value measurement requirements including (1) the application of the highest and best use and valuation premise concepts, (2) measuring the fair value of an instrument classified in a reporting entity’s shareholders’ equity, and (3)

7

quantitative information required for fair value measurements categorized within Level 3. ASU 2011-04 also provides guidance on measuring the fair value of financial instruments managed within a portfolio, and application of premiums and discounts in a fair value measurement. In addition, ASU 2011-04 requires additional disclosure for Level 3 measurements regarding the sensitivity of fair value to changes in unobservable inputs and any interrelationships between those inputs. The amendments in this guidance are to be applied prospectively, and are effective for interim and annual periods beginning after December 15, 2011. The Corporation does not expect that the adoption of this standard will have a material effect on its financial statements.

Note 4 — Other Income and Expense

	Three Months Ended
(In thousands)	May 27, 2011			May 28, 2010
Foreign exchange loss (gain)	$	717		$	(1,053	)
Rental income		(471	)		(526	)
Loss (gain) on asset disposal		86			(151	)
Miscellaneous		(172	)		30
Other non-operating expense (income) — net	$	160		$	(1,700	)

“Miscellaneous” includes, among other things, income/loss from equity securities.

Note 5 — Earnings Per Share

The following table sets forth the computation of earnings per share and earnings per share - assuming dilution:

	Three Months Ended
	May 27, 2011		May 28, 2010
Numerator (in thousands):
Net income	$	32,593	$	30,839
Denominator (in thousands):
Weighted average shares outstanding		40,500		39,639
Effect of dilutive securities:
Stock options and awards		1,299		1,210
Weighted average shares outstanding — assuming dilution		41,799		40,849
Earnings per share	$	0.80	$	0.78
Earnings per share — assuming dilution	$	0.78	$	0.75

Approximately 2.2 million and 3.2 million stock options outstanding for the three month periods ended May 27, 2011 and May 28, 2010, respectively, were excluded from the computation of earnings per share—assuming dilution because the options’ exercise prices were greater than the average market price of the common shares during the respective periods.

The Corporation issued 0.5 million and 0.3 million Class A common shares and Class B treasury shares, respectively, upon exercise of employee stock options and vesting of equity awards during the three months ended May 27, 2011. The Corporation issued 0.8 million and 0.2 million Class A common shares and Class B treasury shares, respectively, upon exercise of employee stock options and vesting of equity awards during the three months ended May 28, 2010.

8

Note 6 — Comprehensive Income

The Corporation’s total comprehensive income is as follows:

	Three Months Ended
(In thousands)	May 27, 2011			May 28, 2010
Net income	$	32,593		$	30,839
Other comprehensive income (loss):
Foreign currency translation adjustments		4,482			(8,998	)
Pension and postretirement benefit adjustments, net of tax		(16	)		(1,445	)
Unrealized gain on securities, net of tax		1			1
Total comprehensive income	$	37,060		$	20,397

Note 7 — Customer Allowances and Discounts

Trade accounts receivable are reported net of certain allowances and discounts. The most significant of these are as follows:

(In thousands)	May 27, 2011		February 28, 2011		May 28, 2010
Allowance for seasonal sales returns	$	36,098	$	34,058	$	38,019
Allowance for outdated products		8,207		8,264		8,118
Allowance for doubtful accounts		5,932		5,374		3,188
Allowance for cooperative advertising and marketing funds		29,432		25,631		26,248
Allowance for rebates		31,862		24,920		24,318
	$	111,531	$	98,247	$	99,891

Certain customer allowances and discounts are settled in cash. These accounts, primarily rebates, which are classified as “Accrued liabilities” on the Consolidated Statement of Financial Position, totaled $13.5 million, $11.9 million and $11.3 million as of May 27, 2011, February 28, 2011 and May 28, 2010, respectively.

Note 8 — Inventories

(In thousands)	May 27, 2011		February 28, 2011		May 28, 2010
Raw materials	$	24,539	$	21,248	$	19,287
Work in process		13,091		6,476		9,701
Finished products		225,886		212,056		185,097
		263,516		239,780		214,085
Less LIFO reserve		79,465		78,358		75,834
		184,051		161,422		138,251
Display materials and factory supplies		19,295		18,308		19,662
	$	203,346	$	179,730	$	157,913

The valuation of inventory under the Last-In, First-Out (LIFO) method is made at the end of each fiscal year based on inventory levels and costs at that time. Accordingly, interim LIFO calculations, by necessity, are based on estimates of expected fiscal year-end inventory levels and costs, and are subject to final fiscal year-end LIFO inventory calculations.

Inventory held on location for retailers with scan-based trading arrangements, which is included in finished products, totaled $51.4 million, $42.1 million and $40.8 million as of May 27, 2011, February 28, 2011 and May 28, 2010, respectively.

9

Note 9 — Deferred Costs

Deferred costs and future payment commitments for retail supply agreements are included in the following financial statement captions:

(In thousands)	May 27, 2011			February 28, 2011			May 28, 2010
Prepaid expenses and other	$	78,366		$	88,352		$	75,198
Other assets		319,536			327,311			298,371
Deferred cost assets		397,902			415,663			373,569
Other current liabilities		(62,998	)		(64,116	)		(52,980	)
Other liabilities		(72,523	)		(76,301	)		(47,298	)
Deferred cost liabilities		(135,521	)		(140,417	)		(100,278	)
Net deferred costs	$	262,381		$	275,246		$	273,291

The Corporation maintains an allowance for deferred costs related to supply agreements of $10.4 million, $10.7 million and $12.2 million at May 27, 2011, February 28, 2011 and May 28, 2010, respectively. This allowance is included in “Other assets” on the Consolidated Statement of Financial Position.

Note 10 — Debt

As of May 27, 2011, the Corporation was party to an amended and restated $350 million secured credit agreement and to an amended and restated receivables purchase agreement that has available financing of up to $80 million. There were no balances outstanding under the Corporation’s credit facility or receivables purchase agreement at May 27, 2011 and February 28, 2011. The Corporation had, in the aggregate, $31.8 million outstanding under letters of credit under these borrowing agreements, which reduces the total credit available to the Corporation thereunder.

There was no debt due within one year as of May 27, 2011 and February 28, 2011. Debt due within one year as of May 28, 2010 was $99 million.

Long-term debt and their related calendar year due dates, net of unamortized discounts which totaled $21.6 million, $22.2 million and $23.9 million as of May 27, 2011, February 28, 2011 and May 28, 2010, respectively, were as follows:

(In thousands)	May 27, 2011		February 28, 2011		May 28, 2010
7.375% senior notes, due 2016	$	213,323	$	213,077	$	212,386
7.375% notes, due 2016		19,794		19,430		18,404
6.10% senior notes, due 2028		181		181		181
Other		—		—		2
	$	233,298	$	232,688	$	230,973

The total fair value of the Corporation’s publicly traded debt, based on quoted market prices, was $240.8 million (at a carrying value of $233.3 million), $237.5 million (at a carrying value of $232.7 million) and $238.5 million (at a carrying value of $231.0 million) at May 27, 2011, February 28, 2011 and May 28, 2010, respectively.

The total fair value of the Corporation’s non-publicly traded debt, term loan and revolving credit facility, based on comparable privately traded debt prices, was $99 million (at a carrying value of $99 million) at May 28, 2010.

At May 27, 2011, the Corporation was in compliance with the financial covenants under its borrowing agreements.

10

Note 11 — Retirement Benefits

The components of periodic benefit cost for the Corporation’s defined benefit pension and postretirement benefit plans are as follows:

	Defined Benefit Pension						Postretirement Benefit
	Three Months Ended						Three Months Ended
(In thousands)	May 27, 2011			May 28, 2010			May 27, 2011			May 28, 2010
Service cost	$	204		$	251		$	363		$	575
Interest cost		2,146			2,213			1,210			1,550
Expected return on plan assets		(1,672	)		(1,660	)		(1,098	)		(1,125	)
Amortization of prior service cost (credit)		59			44			(638	)		(1,850	)
Amortization of actuarial loss		569			526			—			250
	$	1,306		$	1,374		$	(163	)	$	(600	)

The Corporation has a discretionary profit-sharing plan with a 401(k) provision covering most of its United States employees. The profit-sharing plan expense for the three months ended May 27, 2011 was $3.7 million, compared to $3.5 million in the prior year period. The Corporation also matches a portion of 401(k) employee contributions. The expense recognized for the 401(k) match was $1.4 million and $1.1 million for the three months ended May 27, 2011 and May 28, 2010, respectively. The profit-sharing plan and 401(k) matching expenses for the three month periods are estimates as actual contributions are determined after fiscal year-end.

At May 27, 2011, February 28, 2011 and May 28, 2010, the liability for postretirement benefits other than pensions was $25.6 million, $24.1 million and $46.8 million, respectively, and is included in “Other liabilities” on the Consolidated Statement of Financial Position. At May 27, 2011, February 28, 2011 and May 28, 2010, the long-term liability for pension benefits was $59.9 million, $60.1 million and $58.7 million, respectively, and is included in “Other liabilities” on the Consolidated Statement of Financial Position.

Note 12 — Fair Value Measurements

Assets and liabilities measured at fair value are classified using the fair value hierarchy based upon the transparency of inputs as of the measurement date. The classification of fair value measurements within the hierarchy is based upon the lowest level of input that is significant to the measurement. The three levels are defined as follows:

• Level 1 — Valuation is based upon quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2 — Valuation is based upon quoted prices for similar assets and liabilities in active markets, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

• Level 3 — Valuation is based upon unobservable inputs that are significant to the fair value measurement.

The following table shows the Corporation’s assets and liabilities measured at fair value as of May 27, 2011:

	May 27, 2011		Level 1		Level 2		Level 3
Assets measured on a recurring basis:
Active employees’ medical plan trust assets	$	3,277	$	3,277	$	—	$	—
Deferred compensation plan assets (1)		8,688		8,688		—		—
Total	$	11,965	$	11,965	$	—	$	—
Assets measured on a nonrecurring basis:
Assets held for sale	$	5,282	$	—	$	5,282	$	—
Total	$	5,282	$	—	$	5,282	$	—

11

The following table shows the Corporation’s assets and liabilities measured at fair value as of February 28, 2011:

	February 28, 2011		Level 1		Level 2		Level 3
Assets measured on a recurring basis:
Active employees’ medical plan trust assets	$	3,223	$	3,223	$	—	$	—
Deferred compensation plan assets (1)		6,871		6,871		—		—
Total	$	10,094	$	10,094	$	—	$	—
Assets measured on a nonrecurring basis:
Assets held for sale	$	5,282	$	—	$	5,282	$	—
Total	$	5,282	$	—	$	5,282	$	—

The following table shows the Corporation’s assets and liabilities measured at fair value as of May 28, 2010:

	May 28, 2010		Level 1		Level 2		Level 3
Assets measured on a recurring basis:
Active employees’ medical plan trust assets	$	4,025	$	4,025	$	—	$	—
Deferred compensation plan assets (1)		5,963		5,963		—		—
Total	$	9,988	$	9,988	$	—	$	—
Assets measured on a nonrecurring basis:
Assets held for sale	$	5,557	$	—	$	5,557	$	—
Total	$	5,557	$	—	$	5,557	$	—

(1) There is an offsetting liability for the obligation to its employees on the Corporation’s books.

The fair value of the investments in the active employees’ medical plan trust was considered a Level 1 valuation as it is based on the quoted market value per share of each individual security investment in an active market.

The deferred compensation plan includes mutual fund assets. Assets held in mutual funds were recorded at fair value, which was considered a Level 1 valuation as it is based on each fund’s quoted market value per share in an active market. Although the Corporation is under no obligation to fund employees’ nonqualified accounts, the fair value of the related non-qualified deferred compensation liability is based on the fair value of the mutual fund.

Certain assets are measured at fair value on a nonrecurring basis and are subject to fair value adjustments only in certain circumstances. During the fourth quarter of 2010, assets held for sale relating to the Corporation’s party goods product lines, including land and buildings, were written down to fair value of $5.9 million, less cost to sell of $0.3 million, or $5.6 million. During the fourth quarter of 2011, these assets were subsequently re-measured and an additional impairment charge of $0.3 million was recorded. Re-assessment in the current period indicated no change to the fair value of these assets. The fair value of the assets held for sale was considered a Level 2 valuation as it was based on observable selling prices for similar assets that were sold within the past twelve to eighteen months. In addition, land, buildings and certain equipment associated with a distribution facility in the International Social Expression Products segment have been reclassified to “Assets held for sale” on the Consolidated Statement of Financial Position, for all periods presented, as these assets met the criteria to be classified as such during 2011. Bids from third parties for the purchase of these assets exceed current book value, therefore no adjustments to the carrying values were required. The assets included in “Assets held for sale” are expected to sell within one year.

12

Note 13 — Income Taxes

The Corporation’s provision for income taxes in interim periods is computed by applying its estimated annual effective tax rate against income before income tax expense for the period. In addition, non-recurring or discrete items are recorded during the period in which they occur. The magnitude of the impact that discrete items have on the Corporation’s quarterly effective tax rate is dependent on the level of income in the period. The effective tax rate was 35.8% and 39.6% for the three month periods ended May 27, 2011 and May 28, 2010, respectively. During the prior year quarter, the Corporation recognized the deferred tax effects of the reduced deductibility of the postretirement prescription drug coverage due to the enacted U.S. Patient Protection and Affordable Care Act, which increased the Corporation’s income tax expense by $1.6 million.

At February 28, 2011, the Corporation had unrecognized tax benefits of $43.3 million that, if recognized, would have a favorable effect on the Corporation’s income tax expense of $32.8 million. There were no significant changes to this amount during the first quarter of 2012. It is reasonably possible that the Corporation’s unrecognized tax positions as of February 28, 2011 could decrease approximately $9.5 million during the next twelve months due to anticipated settlements and resulting cash payments related to open years after 1996, which are currently under examination.

The Corporation recognizes interest and penalties accrued on unrecognized tax benefits and refundable income taxes as a component of income tax expense. During the first quarter of 2012, the Corporation recognized net expense of $0.5 million for interest and penalties on unrecognized tax benefits and refundable income taxes. As of May 27, 2011, the total amount of gross accrued interest and penalties related to unrecognized tax benefits less refundable income taxes was a net payable of $16.9 million.

The Corporation is subject to examination by the U.S. Internal Revenue Service and various U.S. state and local jurisdictions for tax years 1996 to the present. The Corporation is also subject to tax examination in various international tax jurisdictions, including Canada, the United Kingdom, Australia, France, Italy, Mexico and New Zealand for tax years 2006 to the present.

Note 14 — Business Segment Information

The Corporation has North American Social Expression Products, International Social Expression Products, AG Interactive and non-reportable segments. The North American Social Expression Products and International Social Expression Products segments primarily design, manufacture and sell greeting cards and other related products through various channels of distribution with mass merchandise retailers as the primary channel. AG Interactive distributes social expression products, including electronic greetings, personalized printable greeting cards and a broad range of graphics and digital services and products, through a variety of electronic channels, including Web sites, Internet portals, instant messaging services and electronic mobile devices. The Corporation’s non-reportable operating segments primarily include licensing activities and the design, manufacture and sale of display fixtures.

During the current quarter, certain items that were previously considered corporate expenses are now included in the calculation of segment earnings for the North American Social Expression Products segment. This change is the result of modifications to organizational structures, and is intended to better align the segment financial results with the responsibilities of segment management and the way management evaluates the Company’s operations. In addition, segment results are now reported using actual foreign exchange rates for the periods presented. Previously, segment results were reported at constant exchange rates to eliminate the impact of foreign currency fluctuations. Prior year segment results have been presented to be consistent with the current methodologies.

13

	Total Revenue				Segment Earnings (Loss)
	Three Months Ended				Three Months Ended
(In thousands)	May 27, 2011		May 28, 2010		May 27, 2011			May 28, 2010
North American Social Expression Products	$	303,228	$	308,309	$	59,618		$	64,063
International Social Expression Products		70,205		57,573		3,303			2,834
AG Interactive		16,717		18,554		2,312			2,372
Non-reportable segments		12,199		11,872		4,606			2,152
Unallocated		—		—		(19,049	)		(20,404	)
	$	402,349	$	396,308	$	50,790		$	51,017

For the three months ended May 27, 2011, “Unallocated” includes interest expense for centrally incurred debt, domestic profit-sharing expense and stock-based compensation expense of $6.1 million, $3.7 million and $2.7 million, respectively. For the three months ended May 28, 2010, these amounts totaled $6.2 million, $3.5 million and $2.6 million, respectively. “Unallocated” also includes costs associated with corporate operations including senior management, corporate finance, legal and insurance programs. These costs totaled $6.5 million and $8.1 million for the three months ended May 27, 2011 and May 28, 2010, respectively.

Termination Benefits

Termination benefits are primarily considered part of an ongoing benefit arrangement, accounted for in accordance with ASC Topic 712, “Compensation — Nonretirement Postemployment Benefits,” and are recorded when payment of the benefits is probable and can be reasonably estimated.

The balance of the severance accrual was $5.8 million, $8.0 million and $11.6 million at May 27, 2011, February 28, 2011 and May 28, 2010, respectively. The payments expected within the next twelve months are included in “Accrued liabilities” while the remaining payments beyond the next twelve months are included in “Other liabilities” on the Consolidated Statement of Financial Position.

Expenses associated with Royalty Revenue

The Corporation has agreements for licensing the Care Bears and Strawberry Shortcake characters and other intellectual property. These license agreements provide for royalty revenue to the Corporation, which is recorded in “Other revenue.” These license agreements may include the receipt of upfront advances, which are recorded as deferred revenue and earned during the period of the agreement. Expenses associated with the servicing of these agreements, primarily relating to the licensing activities included in non-reportable segments, are summarized as follows:

	Three Months Ended
(In thousands)	May 27, 2011		May 28, 2010
Material, labor and other production costs	$	2,426	$	2,065
Selling, distribution and marketing expenses		1,345		1,429
Administrative and general expenses		389		433
	$	4,160	$	3,927

14

Deferred Revenue

Deferred revenue, included in “Other current liabilities” and “Other liabilities” on the Consolidated Statement of Financial Position, totaled $38.0 million, $39.4 million and $39.1 million at May 27, 2011, February 28, 2011 and May 28, 2010, respectively. The amounts relate primarily to subscription revenue in the Corporation’s AG Interactive segment and the licensing activities included in non-reportable segments.

Acquisitions

Continuing the strategy of focusing on growing its core greeting card business, on March 1, 2011, the Corporation’s European subsidiary, UK Greetings Ltd., acquired Watermark Publishing Limited and its wholly owned subsidiary Watermark Packaging Limited (“Watermark”). Watermark is a privately held company located in Corby, England, and is considered a leader in the United Kingdom in the innovation and design of greeting cards. Under the terms of the transaction, the Corporation acquired 100% of the equity interests of Watermark for approximately $17.1 million in cash. Cash paid for Watermark, net of cash acquired was approximately $6.0 million and is reflected in investing activities in the Consolidated Statement of Cash Flows.

The total cost of the acquisition has been allocated to the assets acquired and the liabilities assumed based upon their estimated fair values at the date of the acquisition. The estimated purchase price allocation is preliminary and subject to revision as valuation work is still being conducted. The following represents the preliminary purchase price allocation:

Purchase price (in millions):
Cash paid	$	17.1
Cash acquired		(11.1	)
	$	6.0
Allocation (in millions):
Current assets	$	8.7
Property, plant and equipment		0.4
Intangible assets		2.7
Goodwill		1.4
Liabilities assumed		(7.2	)
	$	6.0

The financial results of this acquisition are included in the Corporation’s consolidated results from the date of acquisition. Pro forma results of operations have not been presented because the effect of this acquisition was not deemed material. The Watermark business is included in the Corporation’s International Social Expression Products segment.

Note 15 — Subsequent Event

On June 9, 2011, the Corporation sold certain minor character properties in exchange for cash proceeds of $4.5 million. As a result, the Corporation expects to record a gain of approximately $4.5 million during the second quarter ending August 26, 2011.

15

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our unaudited consolidated financial statements. This discussion and analysis, and other statements made in this Report, contain forward-looking statements, see “Factors That May Affect Future Results” at the end of this discussion and analysis for a description of the uncertainties, risks and assumptions associated with these statements. Unless otherwise indicated or the context otherwise requires, the “Corporation,” “we,” “our,” “us” and “American Greetings” are used in this Report to refer to the businesses of American Greetings Corporation and its consolidated subsidiaries.

Overview

We reported diluted earnings per share of $0.78 for the first quarter, on an increase to revenues of 1.5%, and an increase to operating income of 2.6%, compared to the prior year period. The higher revenues were driven by higher net sales of greeting cards and favorable foreign currency translation. The increase in greeting card net sales was driven by the International Social Expression Products segment, which benefited from both the Watermark acquisition (see below) and additional distribution with existing customers. Partially offsetting these favorable items were lower revenues from party goods, gift packaging products, on-line advertising and other ancillary products. Revenues in the current period also included the unfavorable impact of scan-based trading (“SBT”) implementations, which were primarily related to the expanded distribution in the value channel which was previously disclosed in the fourth quarter of fiscal 2011.

Compared to the prior year first quarter, operating income was favorably impacted by a change in product mix, due to a shift toward higher margin card product versus non-card products and cost savings related to the Papyrus Recycled Paper Greetings (“PRG”) integration and other cost savings initiatives. Operating income was unfavorably impacted by costs associated with the rollout of additional distribution in both North American Social Expression Products segment and International Social Expression Products segment, as well as costs associated with our systems refresh project.

On March 1, 2011, our European subsidiary, UK Greetings Ltd., acquired Watermark Publishing Limited (“Watermark”). Watermark is considered a leader in the innovation and design of greeting cards in the United Kingdom. This acquisition is another step in continuing our strategy of focusing on growing our core greeting card business. For the quarter, Watermark added approximately $7 million to net sales, but had no impact on earnings due to the seasonal nature of this business.

16

Results of Operations

Three months ended May 27, 2011 and May 28, 2010

Net income was $32.6 million, or $0.78 per share, in the first quarter compared to $30.8 million, or $0.75 per share, in the prior year first quarter (all per-share amounts assume dilution).

Our results for the three months ended May 27, 2011 and May 28, 2010 are summarized below:

(Dollars in thousands)	2011			%Total Revenue			2010			%Total Revenue
Net sales	$	396,776			98.6	%	$	392,105			98.9	%
Other revenue		5,573			1.4	%		4,203			1.1	%
Total revenue		402,349			100.0	%		396,308			100.0	%
Material, labor and other production costs		157,929			39.3	%		158,013			39.9	%
Selling, distribution and marketing expenses		123,292			30.6	%		117,551			29.6	%
Administrative and general expenses		65,298			16.2	%		66,032			16.7	%
Other operating income — net		(923	)		(0.2	%)		(594	)		(0.2	%)
Operating income		56,753			14.1	%		55,306			14.0	%
Interest expense		6,124			1.5	%		6,202			1.6	%
Interest income		(321	)		(0.1	%)		(213	)		(0.1	%)
Other non-operating expense (income) — net		160			0.1	%		(1,700	)		(0.4	%)
Income before income tax expense		50,790			12.6	%		51,017			12.9	%
Income tax expense		18,197			4.5	%		20,178			5.1	%
Net income	$	32,593			8.1	%	$	30,839			7.8	%

For the three months ended May 27, 2011, consolidated net sales increased 1.2%, or approximately $5 million, from $392.1 million in the prior year first quarter to $396.8 million in the current three months. The increase was primarily due to the impact of approximately $8 million of favorable foreign currency translation and an approximate $9 million increase in net sales of greeting cards, particularly everyday cards in the International Social Expression Products segment. The increase in International Social Expression Products segment was driven by the Watermark acquisition and additional distribution with existing customers. Partially offsetting these increases were lower net sales of combined gift packaging products and party goods of approximately $4 million, decreased sales of other ancillary products of approximately $4 million and the impact of SBT implementations that unfavorably impacted net sales by approximately $2 million. In addition, net sales in the AG Interactive segment declined by approximately $2 million due to lower advertising revenue and the impact of winding down the Photoworks website.

Other revenue, primarily royalty revenue from our Strawberry Shortcake and Care Bears properties, increased $1.4 million during the three months ended May 27, 2011.

17

Wholesale Unit and Pricing Analysis for Greeting Cards

Unit and pricing comparatives (on a sales less returns basis) for the three months ended May 27, 2011 and May 28, 2010 are summarized below:

	Increase (Decrease) From the Prior Year
	Everyday Cards						Seasonal Cards						Total Greeting Cards
	2011			2010			2011			2010			2011			2010
Unit volume		2.6	%		(1.7	%)		(1.3	%)		(6.0	%)		1.2	%		(3.3	%)
Selling prices		(0.9	%)		1.7	%		2.1	%		4.0	%		0.2	%		2.5	%
Overall increase / (decrease)		1.7	%		(0.1	%)		0.8	%		(2.3	%)		1.4	%		(0.9	%)

During the first quarter, combined everyday and seasonal greeting card sales less returns increased 1.4% compared to the prior year quarter, including improvements in both unit volume and selling prices of 1.2% and 0.2%, respectively. The overall increase was driven by unit growth in our International Social Expression Products segment and price improvements in our North American Social Expression Products segment.

Everyday card sales less returns for the first quarter increased 1.7% with improvements in unit volume of 2.6%. The unit volume increase resulted from the Watermark acquisition and additional distribution with existing customers within our International Social Expression Products Segment, while the selling price decline is a result of the continued shift to a higher mix of our value line cards. Partially offsetting the strong unit performance are decreases in selling prices of 0.9%.

Compared to the prior year quarter, seasonal card sales less returns increased 0.8% with an increase in selling prices of 2.1% offsetting a decline in until volume of 1.3%. The decrease in unit volume was primarily driven by our performances of Father’s Day and Graduation programs.

Expense Overview

Material, labor and other production costs for the three months ended May 27, 2011 were $157.9 million, which was essentially flat compared to the prior year three months. As a percentage of total revenue, these costs were 39.3% in the current period compared to 39.9% for the three months ended May 28, 2010. Lower expenses as a result of continued cost savings initiatives provided an improvement of approximately $2 million. In addition, favorable volume variances of approximately $1 million and mix variances, primarily due to a shift towards higher margin card products versus non-card products, of approximately $2 million also provided a benefit in the current year quarter. These improvements were offset by unfavorable foreign currency translation impacts of approximately $3 million and increased product related in-store display materials and product content costs of $1 million each.

Selling, distribution and marketing (“SDM”) expenses for the three months ended May 27, 2011 were $123.3 million, increasing from $117.6 million for the comparable period in the prior year. The increase was driven by a combination of increased expenses and unfavorable foreign currency translation of approximately $3 million each. Increased supply chain costs of approximately $4 million, specifically merchandiser, freight, and distribution costs, were primarily the result of additional store setup activities. These increases were partially offset by decreased selling expenses of approximately $1 million due to PRG integration and other cost savings programs.

Administrative and general expenses were $65.3 million for the three months ended May 27, 2011, compared to $66.0 million for the prior year period. Driving the slight overall improvement was approximately $3 million of PRG integration costs in the prior year which did not recur and savings of approximately $2 million achieved through the completion of the PRG integration. These decreases were partially offset by increases in bad debt expense and costs associated with our technology systems refresh project of approximately $2 million each.

Our effective tax rate was 35.8% and 39.6% for the three months ended May 27, 2011 and May 28, 2010, respectively. The higher tax rate in the prior year first quarter was due to the recognition of the deferred tax effects of the reduced

18

deductibility of the postretirement prescription drug coverage under the Medicare Part D program, resulting from the U.S. Patient Protection and Affordable Care Act, which increased income tax expense by $1.6 million.

Segment Information

Our operations are organized and managed according to a number of factors, including product categories, geographic locations and channels of distribution. Our North American Social Expression Products and our International Social Expression Products segments primarily design, manufacture and sell greeting cards and other related products through various channels of distribution, with mass retailers as the primary channel. As permitted under Accounting Standards Codification Topic 280, “Segment Reporting,” certain operating divisions have been aggregated into International Social Expression Products segments. The aggregated operating divisions have similar economic characteristics, products, production processes, types of customers and distribution methods. The AG Interactive segment distributes social expression products, including electronic greetings, personalized printable greeting cards and a broad range of graphics and digital services and products, through a variety of electronic channels, including Web sites, Internet portals, instant messaging services and electronic mobile devices.

Segment results are currently reported using actual foreign exchange rates for the periods presented. Previously, segment results were reported at constant exchange rates to eliminate the impact of foreign currency fluctuations. Prior year segment results have been presented to be consistent with the current methodologies. Refer to Note 14, “Business Segment Information,” to the Consolidated Financial Statements for further information and a reconciliation of total segment revenue to consolidated “Total revenue” and total segment earnings (loss) to consolidated “Income before income tax expense.”

North American Social Expression Products Segment

	Three Months Ended
(Dollars in thousands)	May 27, 2011		May 28, 2010		% Change
Total revenue	$	303,228	$	308,309		(1.6	%)
Segment earnings		59,618		64,063		(6.9	%)

Total revenue of our North American Social Expression Products segment for the quarter ended May 27, 2011, decreased $5.1 million, or 1.6%, from the same period in the prior year. The decrease was primarily due to lower net sales of gift packaging and party goods of approximately $5 million and SBT implementations that unfavorably impacted revenue by approximately $2 million. Foreign currency translation favorably impacted total revenue by approximately $2 million.

Segment earnings decreased $4.4 million in the current three months compared to the three months ended May 28, 2010. The decrease was driven by the impact of lower sales of approximately $2 million, the impact of SBT implementations of approximately $2 million, and increased bad debt expense and costs associated with our technology systems refresh project of approximately $2 million each. Higher supply chain costs of approximately $4 million, specifically merchandiser, freight, and distribution costs, primarily the result of additional store set up activities, also contributed to the decrease in earnings. These unfavorable variances were partially offset by the benefits of PRG integration and other cost savings initiatives of approximately $4 million. In addition, the prior year included PRG integration costs of approximately $3 million which did not recur in the current period.

International Social Expression Products Segment

	Three Months Ended
(Dollars in thousands)	May 27, 2011		May 28, 2010		% Change
Total revenue	$	70,205	$	57,573		21.9	%
Segment earnings		3,303		2,834		16.6	%

Total revenue of our International Social Expression Products segment increased $12.6 million, or 21.9% for the three months ended May 27, 2011, compared to the same period in the prior year. The increase was primarily due

19

to the Watermark acquisition during the current quarter, which increased total revenue by approximately $7 million, as well as favorable foreign currency translation impacts of approximately $6 million. Sales of greeting cards also improved, but were offset by a decrease in sales of non-card products.

Segment earnings increased $0.5 million, or 16.6%, in the three months ended May 27, 2011 compared to the same period in the prior year. Approximately half of the improvement was due to a change in product mix resulting from a shift towards higher margin card products versus lower margin non-card products, and half due to favorable foreign currency translation. As expected, based on the historically seasonal nature of Watermark, this business was essentially break-even for the first quarter.

AG Interactive Segment

	Three Months Ended
(Dollars in thousands)	May 27, 2011		May 28, 2010		% Change
Total revenue	$	16,717	$	18,554		(9.9	%)
Segment earnings		2,312		2,372		(2.5	%)

Total revenue of AG Interactive for the three months ended May 27, 2011 was $16.7 million compared to $18.6 million in the prior year first quarter. This decrease in revenue was driven primarily by lower advertising revenue and the impact of winding down the Photoworks website. At the end of the first quarter of 2012, AG Interactive had approximately 3.8 million online paid subscriptions versus 3.9 million at the end of the first quarter in the prior year.

Segment earnings decreased $0.1 million during 2012 compared to the prior year first quarter. The impact of lower revenues was offset by reduced product management and marketing costs, although a portion of such costs may occur later in the year.

Liquidity and Capital Resources

The seasonal nature of our business precludes a useful comparison of the current period and the fiscal year-end financial statements; therefore, a Consolidated Statement of Financial Position as of May 28, 2010 has been included.

Operating Activities

Operating activities provided $12.0 million of cash during the three months ended May 27, 2011, compared to $32.5 million in the prior year period.

Accounts receivable used $12.4 million of cash during the three months ended May 27, 2011, compared to providing $19.6 million of cash during the same period in the prior year. The cash usage in the current year first quarter was attributable to the timing of cash collections both prior to, and during, the quarter. Strong cash collections during the prior year fourth quarter lead to a relatively lower accounts receivable balance at the beginning of the current year first quarter, while slower receipt of customer payment near the end of the first quarter lead to a growth in the accounts receivable balance, and thus a use of cash during the current year first quarter. The cash inflow in the prior year first quarter was primarily the result of a higher accounts receivable balance at the beginning of the prior year first quarter, which was the result of strong sales during the fourth quarter ended February 28, 2010. The subsequent collection of these amounts during the prior year first quarter resulted in a source of cash during that period.

Inventory used $18.8 million of cash during the three months ended May 27, 2011, compared to providing $4.5 million of cash during the prior year first quarter. The use of cash in the current year quarter is primarily due to the inventory build of cards and fixtures associated with expanded distribution within the value channel. The source of cash in the prior year was due to the North American Social Expression Products segment, which lowered inventory levels for all product categories.

20

Deferred costs — net generally represents payments under agreements with retailers, net of the related amortization of those payments. Amortization exceeded payments by $13.1 million and $13.8 million during the three months ended May 27, 2011 and May 28, 2010, respectively.

Accounts payable and other liabilities used $27.9 million of cash during the three months ended May 27, 2011, compared to $66.4 million in the prior year first quarter. The year-over-year change in cash usage was attributable to both a growth in accounts payable and lower variable compensation payments during the current year first quarter compared to the prior year first quarter. The growth in accounts payable during the current year first quarter was primarily due to the increased inventory associated with the expanded distribution in the value channel and year-over-year timing of payments. The prior year first quarter included the payment of variable compensation from the year ended February 28, 2010, which were higher than for the year ended February 28, 2011, thus resulting in a larger use of cash in the prior year first quarter.

Investing Activities

Investing activities used $14.9 million of cash during the three months ended May 27, 2011, compared to providing $19.1 million of cash during the three months ended May 28, 2010. The use of cash in the current period related to cash payments for business acquisitions as well as capital expenditures of $8.9 million. During the current year first quarter, cash paid for the Watermark acquisition, net of cash acquired, was $6.0 million.

The source of cash in the prior year first three months was primarily related to $24.5 million received from the sale of certain assets, equipment and processes of the DesignWare party goods product lines. Partially offsetting this source of cash were cash payments for capital expenditures of $6.0 million.

Financing Activities

Financing activities used $4.0 million of cash during the three months ended May 27, 2011, compared to providing $0.3 million during the three months ended May 28, 2010. During the current year first quarter, the receipt of the exercise price on stock options provided $12.0 million of cash. This source of cash was more than offset by cash used for share repurchases of $9.9 million and cash paid for dividends of approximately $6.1 million. During the three months ended May 27, 2011, $0.4 million was paid to repurchase approximately 0.1 million Class A common shares under our repurchase program and $9.5 million was paid to repurchase approximately 0.4 million Class B common shares in accordance with our Amended and Restated Articles of Incorporation.

In the first quarter of fiscal 2011, receipt of the exercise price on stock options provided $19.1 million of cash, while the repurchase of approximately 0.5 million Class B common shares in accordance with our Amended and Restated Articles of Incorporation and the payment of dividends used $13.0 million and $5.5 million of cash, respectively.

Credit Sources

Substantial credit sources are available to us. In total, we had available sources of up to $430 million at May 27, 2011, which included our $350 million senior secured credit facility and our $80 million accounts receivable securitization facility. Borrowings under the accounts receivable securitization facility are limited based on our eligible receivables outstanding. At May 27, 2011, we had no borrowings outstanding under the accounts receivable securitization facility or the revolving credit facility. At May 27, 2011, we had, in the aggregate, $31.8 million outstanding under letters of credit, which reduces the total credit availability under these facilities.

Please refer to the discussion of our borrowing arrangements as disclosed in the “Credit Sources” section of our Annual Report on Form 10-K for the year ended February 28, 2011 for further information.

At May 27, 2011, we were in compliance with our financial covenants under the borrowing agreements described above.

21

Throughout fiscal 2012, we will continue to consider all options for capital deployment including growth options, capital expenditures, the system refresh project, our world headquarters project, the opportunity to repurchase our own shares, reducing debt and, as appropriate, preserving cash. Consistent with this ongoing objective, in March 2011 we announced that in fiscal 2012 we expect that we will begin to invest in the development of a world headquarters in the Northeast Ohio area. Since we are currently in the early stages of this project and have not yet completed the architectural design for the world headquarters building, we cannot reasonable estimate the amount that we will spend over the life of this project; however, amounts could be material in future fiscal years and over the life of the project. While the state of Ohio has committed to a number of tax credits, loans and other incentives to encourage us to remain in Ohio, we expect to spend tens of millions of dollars of our own funds on the project, the majority of which are expected to be incurred after fiscal 2012. In addition, as announced in January 2009, our Board of Directors has authorized the repurchase of up to $75 million of Class A common shares ($45.7 million remaining at May 27, 2011), that may be made through open market purchases or privately negotiated transactions as market conditions warrant, at prices we deem appropriate, and subject to applicable legal requirements and other factors. There is no set expiration date for this program. We also may, from time to time, seek to retire or purchase our outstanding debt through cash purchases and/or exchanges through open market purchases, privately negotiated transactions, refinancings, or otherwise, including strategically repurchasing our 7.375% senior unsecured notes due in 2016. Such repurchases, refinancings or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

Over the next five to seven years we expect to allocate resources, including capital, to refresh our information technology systems by modernizing our systems, redesigning and deploying new processes, and evolving new organization structures all intended to drive efficiencies within the business and add new capabilities. Due to the long-term nature of this project, together with the fact that we are in the early stages of this project, currently we cannot reasonably estimate amounts that we will spend over the life of this project; however, amounts could be material in any given fiscal year and over the life of the project. During fiscal 2012, we currently estimate that we will spend $13 million plus or minus 25%, including both expense and capital, on these system projects.

Our future operating cash flow and borrowing availability under our credit agreement and our accounts receivable securitization facility are expected to meet currently anticipated funding requirements. The seasonal nature of our business results in peak working capital requirements that may be financed through short-term borrowings when cash on hand is insufficient.

Critical Accounting Policies

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. Please refer to the discussion of our Critical Accounting Policies as disclosed in our Annual Report on Form 10-K for the year ended February 28, 2011.

Factors That May Affect Future Results

Certain statements in this report may constitute forward-looking statements within the meaning of the Federal securities laws. These statements can be identified by the fact that they do not relate strictly to historic or current facts. They use such words as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. These forward-looking statements are based on currently available information, but are subject to a variety of uncertainties, unknown risks and other factors concerning our operations and business environment, which are difficult to predict and may be beyond our control. Important factors that could cause actual results to differ materially from those suggested by these forward-looking statements, and that could adversely affect our future financial performance, include, but are not limited to, the following:

• a weak retail environment and general economic conditions;

• competitive terms of sale offered to customers;

• retail consolidations, acquisitions and bankruptcies, including the possibility of resulting adverse changes to retail contract terms;

22

• the timing and impact of investments in new retail or product strategies as well as new product introductions and achieving the desired benefits from those investments;

• the timing and impact of converting customers to a scan-based trading model;

• the ability to achieve the desired benefits associated with our cost reduction efforts;

• our ability to successfully implement, or achieve the desired benefits associated with, any information systems refresh we may implement;

• Schurman Fine Paper’s ability to successfully operate its retail operations and satisfy its obligations to us;

• consumer acceptance of products as priced and marketed;

• the impact of technology, including social media, on core product sales;

• escalation in the cost of providing employee health care;

• the ability to achieve the desired accretive effect from any share repurchase programs;

• the ability to comply with our debt covenants;

• fluctuations in the value of currencies in major areas where we operate, including the U.S. Dollar, Euro, U.K. Pound Sterling and Canadian Dollar; and

• the outcome of any legal claims known or unknown.

Risks pertaining specifically to AG Interactive include the viability of online advertising, subscriptions as revenue generators, and the ability to adapt to rapidly changing social media and the digital photo sharing space.

The risks and uncertainties identified above are not the only risks we face. Additional risks and uncertainties not presently known to us or that we believe to be immaterial also may adversely affect us. Should any known or unknown risks or uncertainties develop into actual events, or underlying assumptions prove inaccurate, these developments could have material adverse effects on our business, financial condition and results of operations. For further information concerning the risks we face and issues that could materially affect our financial performance related to forward-looking statements, refer to our periodic filings with the Securities and Exchange Commission, including the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended February 28, 2011.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

For further information, refer to our Annual Report on Form 10-K for the year ended February 28, 2011. There were no material changes in market risk, specifically interest rate and foreign currency exposure, for us from February 28, 2011, the end of our preceding fiscal year, to May 27, 2011, the end of our most recent fiscal quarter.

Item 4. Controls and Procedures

American Greetings maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its reports under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to the Corporation’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

American Greetings carries out a variety of on-going procedures, under the supervision and with the participation of the Corporation’s management, including its Chief Executive Officer and Chief Financial Officer, to evaluate the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures. Based on the

23

foregoing, the Chief Executive Officer and Chief Financial Officer of American Greetings concluded that the Corporation’s disclosure controls and procedures were effective as of the end of the period covered by this report.

There has been no change in the Corporation’s internal control over financial reporting during the Corporation’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

Electrical Workers Pension Fund, Local 103, I.B.E.W. Litigation. As previously disclosed, on March 20, 2009, a shareholder derivative complaint was filed in the Court of Common Pleas of Cuyahoga County, Ohio, by the Electrical Workers Pension Fund, Local 103, I.B.E.W., against certain of our current and former officers and directors (the “Individual Defendants”) and names American Greetings Corporation as a nominal defendant. The suit alleges that the Individual Defendants breached their fiduciary duties to American Greetings Corporation and seeks an unspecified amount of damages from the Individual Defendants and modifications to our corporate governance policies. The parties recently participated in mediation and reached a settlement, which includes an immaterial payment to plaintiff’s counsel as well as certain modifications to our corporate governance policies. The plaintiff filed the Stipulation of Settlement with the Court of Common Pleas of Cuyahoga County, Ohio, on June 29, 2011 and on June 30, 2011, the Court granted preliminary approval of the Settlement, as well as approved the Notice of Proposed Settlement of Shareholder Derivative Action, which is attached to this Quarterly Report as Exhibit 99.1. After the notice period expires, the Court will hold a final hearing to issue final approval of the Settlement.

Cookie Jar/MoonScoop Litigation. As previously disclosed, on May 6, 2009, American Greetings Corporation and its subsidiary, Those Characters From Cleveland, Inc. (“TCFC”), filed an action in the Cuyahoga County (Ohio) Court of Common Pleas against Cookie Jar Entertainment Inc. (“Cookie Jar”) and its affiliates, Cookie Jar Entertainment (USA) Inc. (formerly known as DIC Entertainment Corporation) (“DIC”), and Cookie Jar Entertainment Holdings (USA) Inc. (formerly known as DIC Entertainment Holdings, Inc.) relating to the July 20, 2008 Binding Letter Agreement between American Greetings Corporation and Cookie Jar (the “Cookie Jar Agreement”) for the sale of the Strawberry Shortcake and Care Bears properties (the “Properties”). On May 7, 2009, Cookie Jar removed the case to the United States District Court for the Northern District of Ohio. Simultaneously, Cookie Jar filed an action against American Greetings Corporation, TCFC, Mike Young Productions, LLC (“Mike Young Productions”) and MoonScoop SAS (“MoonScoop”) in the Supreme Court of the State of New York, County of New York. Mike Young Productions and MoonScoop were named as defendants in the action in connection with the binding term sheet between American Greetings Corporation and MoonScoop dated March 24, 2009 (the “MoonScoop Binding Agreement”), providing for the sale to MoonScoop of the Properties.

On May 7, 2010, the legal proceedings involving American Greetings Corporation, TCFC, Cookie Jar and DIC were settled, without a payment to any of the parties. As part of the settlement, on May 7, 2010, the Cookie Jar Agreement was amended to, among other things, terminate American Greetings Corporation’s obligation to sell to Cookie Jar, and Cookie Jar’s obligation to purchase, the Properties. As part of the settlement, Cookie Jar Entertainment (USA) Inc. will continue to represent the Strawberry Shortcake property on behalf of American Greetings Corporation, and will become an international agent for the Care Bears property. On May 19, 2010, the Northern District of Ohio court granted the parties’ joint motion to dismiss all claims and counterclaims without prejudice.

On August 11, 2009, MoonScoop filed an action against American Greetings Corporation and TCFC in the United States District Court for the Northern District of Ohio, alleging breach of contract and promissory estoppel relating to the MoonScoop Binding Agreement. On MoonScoop’s request, the court agreed to consolidate this lawsuit with the first Ohio lawsuit (described above) for all pretrial purposes. The parties filed motions for summary judgment on various claims. On April 27, 2010, the court granted American Greetings Corporation’s motion for summary judgment on MoonScoop’s breach of contract and promissory estoppel claims, dismissing these claims with

24

prejudice. On the same day, the court also ruled that American Greetings Corporation must indemnify MoonScoop against Cookie Jar’s claims in this lawsuit. On May 21, 2010, MoonScoop appealed the court’s summary judgment ruling to the United States Court of Appeals for the Sixth Circuit. On June 4, 2010, American Greetings Corporation and TCFC appealed to the United States Court of Appeals for the Sixth Circuit the court’s ruling that it must indemnify MoonScoop against the cross claims asserted against it. The appeal has been briefed, and the parties are waiting for the Court of Appeals to calendar the oral argument. We believe that the allegations in the lawsuit against American Greetings Corporation and TCFC are without merit and intend to continue to defend the actions vigorously. We currently do not believe that the impact of the lawsuit against American Greetings Corporation and TCFC, if any, will have a material adverse effect on our financial position, liquidity or results of operations.

In addition to the foregoing, we are involved in certain legal proceedings arising in the ordinary course of business. We, however, do not believe that any of the other litigation in which we are currently engaged, either individually or in the aggregate, will have a material adverse effect on our business, consolidated financial position or results of operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a)	Not applicable.
(b)	Not applicable.
(c)	The following table provides information with respect to our purchases of our common shares during the three months ended May 27, 2011.

										Maximum Number of
										Shares (or
							Total Number of			Approximate
				Average			Shares Purchased as			Dollar Value) that May
	Total Number of Shares			Price Paid			Part of Publicly			Yet Be Purchased
Period	Repurchased			per Share			Announced Plans			Under the Plans
March 2011	Class A —	—			—			—		$	46,578,874
	Class B —	200	(1)	$	23.08			—
April 2011	Class A —	—			—			—		$	46,578,874
	Class B —	—	(1)		—			—
May 2011	Class A —	40,000		$	22.94	(2)		40,000	(3)	$	45,661,289
	Class B —	386,690	(1)	$	24.52			—
Total	Class A —	40,000						40,000	(3)
	Class B —	386,890	(1)					—

(1)	There is no public market for our Class B common shares. Pursuant to our Articles of Incorporation, a holder of Class B common shares may not transfer such Class B common shares (except to permitted transferees, a group that generally includes members of the holder’s extended family, family trusts and charities) unless such holder first offers such shares to the Corporation for purchase at the most recent closing price for the Corporation’s Class A common shares. If the Corporation does not purchase such Class B common shares, the holder must convert such shares, on a share for share basis, into Class A common shares prior to any transfer. It is the Corporation’s general policy to repurchase Class B common shares, in accordance with the terms set forth in our Amended and Restated Articles of Incorporation, whenever they are offered by a holder, unless such repurchase is not otherwise permitted under agreements to which the Corporation is a party. All of the shares were repurchased by American Greetings for cash pursuant to this right of first refusal.
(2)	Excludes commissions paid, if any, related to the share repurchase transactions.
(3)	On January 13, 2009, American Greetings announced that its Board of Directors authorized a program to repurchase up to $75 million of its Class A common shares. There is no set expiration date for this repurchase program and these repurchases are made through a 10b5-1 program in open market or privately negotiated transactions which are intended to be in compliance with the SEC’s Rule 10b-18, subject to market conditions, applicable legal requirements and other factors.

25

Item 6. Exhibits

Exhibits required by Item 601 of Regulation S-K

Exhibit
Number	Description
10.1	Key Management Annual Incentive Plan (Fiscal Year 2012 Description).
10.2	American Greetings Corporation 2007 Omnibus Incentive Compensation Plan (as Amended Effective May 1, 2011).
31 (a)	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31 (b)	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.1	Notice of Proposed Settlement of Shareholder Derivative Action.
101	The following materials from the Corporation’s quarterly report on Form 10-Q for the quarter ended May 27, 2011, formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Statement of Operations for the quarters ended May 27, 2011 and May 28, 2010, (ii) Consolidated Statement of Financial Position at May 27, 2011, February 28, 2011 and May 28, 2010, (iii) Consolidated Statement of Cash Flows for the quarters ended May 27, 2011 and May 28, 2010, and (iv) Notes to the Consolidated Financial Statements for the quarter ended May 27, 2011 tagged as blocks of text.
	In accordance with Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be part of any registration statement or other document filed under the Securities Act of 1933 or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

26

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

AMERICAN GREETINGS CORPORATION
By:	/s/ Joseph B. Cipollone
	Joseph B. Cipollone
	Vice President and Chief Accounting Officer *

July 6, 2011

* (Signing on behalf of Registrant as a duly authorized officer of the Registrant and signing as the chief accounting officer of the Registrant.)

27

EX-10.1

Exhibit 10.1

Rewards for your Contributions to Our Success Key Management Annual Incentive Plan • Fiscal Year 2012

Creativity...Innovation... Collaboration... Our commitment to these ideals has allowed us to become one of the world’s largest publicly owned developers, producers and distributors of social expressions products. As a leader at American Greetings, you have a unique opportunity to focus our associates on these key areas and to cultivate a work environment that is stimulating, productive and rewarding. In addition, the decisions you make and the things you do every day have a direct and meaningful impact both within your department and across the company. We have designed the Key Management Annual Incentive Plan to reward you for the critical role you play. As a leader, you help foster and channel your energy and the energy of those around you into building on our business principles, strengthening our marketplace position and generating value for our shareholders. Table of Contents Plan Objectives and Who is Eligible. . . . . . . . . . . . . . . . . . . . . . 2 How the Plan Works. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Emphasis of Each Plan Component. . . . . . . . . . . . . . . . . . . . . 4 Measuring Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Corporate Component. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Business Unit Component. . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Individual Component. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Example Calculation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Important Administrative Plan Details. . . . . . . . . . . . . . . . . . . 12 Key Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Appendix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 1

Plan Objectives • Focuses on shareholder value and profitable revenue growth | Our shareholders expect us to evaluate our results in the same way they do • Emphasizes teamwork and mutual cooperation | Our success depends on the collaborative effort within each of our business units • Demonstrates the importance of personal drive and commitment to quality | Individual contributions are the foundation of our collective accomplishments • Rewards leaders for success | Award opportunity is greatest when attention is given to the achievement of objectives in each of the three performance areas Watch for Your Participant Letter You will receive a Participant Letter that outlines information specific to your participation in the Plan: • Your assigned business unit and sub-business unit, if any • The performance multiplier for your business unit and sub-business unit • Your total target award Who Is Eligible You are eligible to participate in the Plan if you are a Key Manager or Corporate-level Officer in one of the following primary business units: • Corporate Consolidated • Total Social Expressions Group (SEG) • AG Intellectual Properties Group • AG Interactive • AG Properties • UK Greetings • John Sands Group Refer to the sections entitled Important Administrative Plan Details and Key Terms for additional details on eligibility for participation in the Plan. 2

How the Plan Works The Plan provides a cash award for the achievement of goals in three key performance areas measured over a 12-month fiscal year. Success in these key areas helps American Greetings create shareholder value and ensure profitable growth over the long term. Your Award Opportunity Your total target award is established at the beginning of each fiscal year and will be communicated to you at that time. Your total target award is: • A percentage of your base earnings based on your job level • The award you would earn if each goal is achieved in each performance area The amount of the award you receive will increase or decrease based on actual performance in these three key areas: American Greetings will establish goals at the beginning of each fiscal year: • Corporate goals are developed by management and approved by the Board of Directors. • Business unit goals are developed by each business unit based on its strategic direction, business opportunities and growth projections. These goals, as they apply to our Section 16 officers, are approved by the Board of Directors. • Individual performance goals are established with your manager through the Performance Management Process. At the end of the fiscal year, American Greetings determines the extent to which each goal has been met. Corporate Performance Business Unit Performance Individual Performance 3 E X A M P L E If base earnings are $70,000 and target award percentage is 10% of base earnings, total target award is $7,000. Base Earnings ($70,000) x Target Award % (10%) = Target Award ($7,000)

Emphasis of Each Plan Component For all plan participants, the business unit component is 50% of your total target award. The weights for the corporate and individual components vary based on the potential the job role has to affect these results. The more senior the role, the greater the impact these individuals’ decisions have on the achievement of corporate objectives. Therefore, senior job levels have a heavier weighting on the corporate component and less senior job levels have a heavier weighting assigned to the individual component. F I S C A L Y E A R 2 0 1 0 WE I G H T I N G S Job Level Corporate Business Unit Individual Chairman of the Board CEO President and COO Corporate-level Senior Vice Presidents Other Section 16 Executive Officers 30% 50% 20% Corporate-level Vice Presidents Executive Directors Key Managers 1 and 2 20% 50% 30% E X A M P L E Ben: • Key Manager 1, Total Social Expressions Group (SEG) • $70,000 base earnings • $7,000 total target award (10% of base earnings) $2,100 = Individual ($7,000 x 30%) $1,400 = Corporate ($7,000 x 20%) $3,500 = Business Unit ($7,000 x 50%) 4

Measuring Performance When American Greetings results for the fiscal year are final, the company assesses achievement of goals in each performance area. Performance in each area will determine your actual Plan award. Awards for the corporate and business unit components are based on the financial performance award scale. Individual awards are based on your performance rating. Individual Performance Total Award Corporate Performance Business Unit Performance + + = Financial Performance Award Scale Your actual award is based on fiscal year-end performance results using the award scale shown at left for corporate and business unit financial measures. (See Measuring Performance table on page 6 for details.) To earn an award, performance in each area must at least reach threshold. There is no award for below-threshold performance. Achieving goal means American Greetings pays awards at target levels. Performance above goal will result in an increased award up to a maximum level. The award range for American Greetings financial measures is 0% — 200% of target award. Actual Award 200% of Target 100% of Target THRESHOLD X% of Target* 0% of Target (No Award Below Threshold) Performance Above Goal Goal Below Goal Below Threshold G O A L MAXIMUM Performance Multiplier — How It’s Used in the Award Scale Performance multipliers are another way to think about the award scale. There is a relationship between performance and your actual award. For example, there is a 4:1 multiplier for the Corporate EPS measure. This means that for every 1% increase or decrease in the percentage of goal achieved, the Corporate EPS target award will be adjusted up or down by 4% to determine the actual award. Performance multipliers vary (see the Appendix on page 14 for complete list). 5

Corporate Component The corporate component consists of two parts: • Corporate Earnings per Share (EPS) • Corporate Total Revenue (Total Revenue) Each of these parts is weighted. The Plan is designed to emphasize the importance of our leaders’ abilities to influence EPS, while paying attention to how they can affect Total Revenue. The weighting applied to the total target award for the corporate component is: • 90% for EPS • 10% for Total Revenue The potential award under the corporate component ranges from 0% to 200% of target award. Performance has a direct impact on actual award. For every 1% increase or decrease in the percentage of goal achieved: • EPS target award will be adjusted up or down by 4% to determine the actual award for this part of the corporate component. • Total Revenue target award will be adjusted up or down by 5% to determine the actual award (Total Revenue goal is defined as a range between 97% and 103% of goal). You can earn up to 200% of the total target award for the corporate component based on EPS performance, Total Revenue performance or a combination of the two. Performance Measures METRIC WHY IT’S IMPORTANT Corporate Earnings per Share (EPS) EPS shows how much profit was generated on a per share basis. It communicates to the investment community the power the company has to make money. The higher our EPS, the greater value the company is able to provide its shareholders. Corporate Total Revenue (Total Revenue) When investing in a company, an investor wants to see it grow or improve over time. Management sets a Corporate Total Revenue goal each year to keep activities focused on growing the business year-over-year. Earnings Before Interest and Taxes (EBIT) EBIT is also known as operating income. It measures the business unit’s earnings before the deduction of interest payments and taxes. Refer to the section entitled Key Terms for definitions for these financial measures. Total Revenue Goal Is a Range The Total Revenue portion of the corporate component has a goal defined as a range. That’s because American Greetings believes we have met our Total Revenue objective if we perform between 97% and 103% of goal. 6

Corporate Component C O R P O R A T E E P S Award Scale (4:1) Performance as % of Goal Actual Award as a % of Target Actual Award in Dollars Maximum 127.5% 200% $2,800 120% 170% $2,380 110% 130% $1,820 Goal 100% 90% $1,260 95% 70% $980 Threshold 90% 50% $700 H O W I T ’ S C A L C U L A T E D The formula to calculate your actual award as a percent of target is: (Actual Performance – Goal) x 4 + 90% = Actual Award as a % of Target Award Performance Above Goal: (105% — 100%) x 4 + 90% = 110% of Target Award Performance Below Goal: (95% — 100%) x 4 + 90% = 70% of Target Award C O R P O R A T E T O T A L R E V E N U E Award Scale (5:1) Performance as % of Goal Actual Award as a % of Target Actual Award in Dollars Maximum 141% 200% $2,800 125% 120% $1,680 105% 20% $280 Goal 97% – 103% 10% $140 96% 5% $70 Threshold 95% 0% $0 H O W I T ’ S C A L C U L A T E D The formula to calculate your actual award as a percent of target is: (Actual Performance – Goal) x 5 + 10% = Actual Award as a % of Target Award Performance Above Goal: (105% — 103%) x 5 + 10% = 20% of Target Award Performance Below Goal: (96% — 97%) x 5 + 10% = 5% of Target Award B E N ’ S A C T U A L AWA R D F O R C O R P O R AT E C OMP O N E N T • EPS Actual Performance: 95% of goal = actual award of 70% of target ($980) • Total Revenue Actual Performance: 125% of goal = actual award of 120% of target ($1,680) E X A M P L E Ben, Key Manager 1 $7,000 total target award • $1,400 corporate component (20% of total target award) • $1,260 Corporate EPS (90% of total corporate component) • $140 Corporate Total Revenue (10% of total corporate component) Corporate Performance Threshold Each part of the corporate component has its own performance threshold: • EPS: 90% of goal • Total Revenue: 95% of goal The performance threshold must be met to earn an actual award for that measure. Total Award: $980 + $1,680 = $2,660 7

Business Unit Component The award for your primary business unit component will be based on performance in either: • Business Unit Pro Forma EBIT • Product Line Contribution (PLC) or • Corporate EBIT All associates are assigned to a primary business unit. Some will also be assigned to a sub-business unit, which may have different performance measures. Refer to your personalized Participant Letter for your assigned business unit and sub-business unit, if applicable, and performance multiplier. See the Appendix on page 14 for more details. Business Unit Performance Threshold • All primary and sub-business units have a performance threshold of 90% of goal. Award: $3,220 E X A M P L E Ben, Key Manager 1 $7,000 total target award • $3,500 business unit component (50% of total target award) T O T A L S E G Award Scale (4:1) Performance as % of Goal Actual Award as a % of Target Actual Award in Dollars Maximum 125% 200% $7,000 120% 180% $6,300 115% 160% $5,600 110% 140% $4,900 105% 120% $4,200 Goal 100% 100% $3,500 98% 92% $3,220 95% 80% $2,800 Threshold 90% 60% $2,100 H O W I T ’ S C A L C U L A T E D The formula to calculate your actual award as a percent of target is: (Actual Performance – Goal) x 4 + 100% = Actual Award as a % of Target Award Performance Above Goal: (110% — 100%) x 4 + 100% = 140% of Target Award Performance Below Goal: (98% — 100%) x 4 + 100% = 92% of Target Award B EN’ S ACTUA L AWA R D FOR BUS INE S S UNI T COMPONENT Total SEG Actual Performance: 98% of goal = actual award of 92% of target ($3,220) 8

Individual Component Your award under the individual component is based on your performance rating under the performance management process. Based on your performance rating, you will receive 0% to 200% of your target award, as shown in the chart below. Performance Rating Actual Award as a % of Target Exceeds Expectations (Manager Discretion) 200% Exceeds Expectations 150% Meets Expectations 100% Improvement Expected/Performance Below Peer Level 0% Participants who receive an “Improvement Expected/Performance Below Peer Level” rating will not receive an individual performance incentive and will only receive 50% of any incentive otherwise earned under the corporate and business unit components. If Corporate EPS performance is below threshold, associates with a performance rating of “Exceeds Expectations” will receive an award for the individual performance component as shown in the chart above. Individuals with a “Meets Expectations” or “Improvement Expected/Below Peer Level” performance rating will not receive any portion of the individual performance incentive if Corporate EPS performance is below threshold. E X A M P L E Ben, Key Manager 1 $7,000 total target award • $2,100 individual component (30% of total target award) • Individual Actual Performance: Exceeds Expectations Individual Target Award $ 2,100 x Actual Award as a % of Target x 150% Individual Performance Actual Award $ 3 , 1 5 0 Senior Executive Officers Refer to the fiscal year 2012 Addendum to the Individual Performance Component, included with your Award Letter, for a complete description of how individual performance under the Key Management Annual Incentive Plan applies to you. 9

Example Calculation Here is an example of how your actual award is determined. $2,100 = Individual Target ($7,000 x 30%) Individual Performance Individual Performance Rating $1,400 = Corporate Target ($7,000 x 20%) • $1,260 EPS • $140 Total Revenue Corporate Goal • $1.25 Corporate EPS • $1.7 Billion Corporate Total Revenue $3,500 = Business Unit Target ($7,000 x 50%) Business Unit Goal $140 Million Total SEG E X A M P L E Ben, Key Manager 1 Total Social Expressions Group (SEG) Base Earnings: $70,000 Total Target Award: $7,000 (10% of base earnings) A C T U A L P E R F O R M A N C E The chart below outlines the performance goals and actual performance in the three categories — American Greetings corporate and business unit and Ben’s individual performance. Performance Performance and Award Results Component and Measure Goal Actual Performance Performance as a % of Goal Award as a % of Target Corporate Component Corporate EPS $1.25 per share $1.19 per share 95% 70% Corporate Total Revenue $1.7 Billion $2.1 Billion 125% * 120% Business Unit Total Revenue Total SEG Pro Forma EBIT $140 Million $137.2 Million 98% 92% Individual Component Individual Performance Rating Meets Expectations Exceeds Expectations N/A 150% * Goal is a range from 97% — 103% of target. To illustrate how awards are calculated, examples of performance goals are provided in this brochure. Performance is included in the examples to calculate example awards. These are examples only; performance goals will be different and may be higher or lower than the examples provided. 10

Ben’s Total Award Example: Here’s a look at Ben’s total award based on the performance shown on the previous page. Total Target Award $7,000 Total Actual Award $9,030 0 2,000 4,000 6,000 8,000 $10,000 $3,500 $2,100 $3,150 $3,220 $2,660 $1,400 C O R P O R AT E C O M P O N E N T Target Award x Award as % of Target = Actual Award Corporate EPS $1,400 x 70% = $980 Corporate Total Revenue $1,400 x 120% = $1,680 Total = $2,660 B U S I N E S S U N I T C O M P O N E N T Target Award x Award as % of Target = Actual Award $3,500 x 92% = $3,220 I N D I V I D U A L C O M P O N E N T Target Award x Award as % of Target = Actual Award $2,100 x 150% = $3,150 11

New Hires If you are hired during the Plan year — defined as the American Greetings fiscal year ending February 29, 2012 — and are eligible to participate in the Key Management Annual Incentive Plan, you will receive a prorated incentive award based on the period of time you participated in the Plan and your base earnings during that time. Promotions and Transfers If you are promoted or you move from one business unit to another during the Plan year, your individual target award, base earnings, business unit goal and corresponding performance multiplier may change. If any of these do change, your award will be calculated based on the targets, base earnings, plan provisions and actual performance for each business unit you participated in on a prorated basis and rounded to the nearest full month. Termination If you voluntarily or involuntarily leave American Greetings before the completion of the Plan year, you will forfeit your Key Management Annual Incentive Plan award for that fiscal year. Retirement, Leave of Absence, Disability, Death If your employment ends during the Plan year because you elect to retire after age 60, or if you take a leave of absence, suffer a permanent disability or die, your actual award will be prorated to the nearest full month based on the actual period you participated in the Plan during the year. An associate will be deemed to suffer a permanent disability only in the following circumstances: (A) where an associate is absent from employment with American Greetings due to his or her inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment, which either can be expected to result in death, or can be expected to last for a continuous period of not less than 12 months; or (B) where an associate is scheduled to receive income replacement benefits for a period of not less than 3 months under an accident and health plan covering American Greetings associate on account of a medically determinable physical or mental impairment that can be expected to result in death or last for a continuous period of not less than 12 months. Omnibus Incentive Plan The Key Management Annual Incentive Plan is governed by the American Greetings Corporation 2007 Omnibus Incentive Compensation Plan, as such plan may be amended from time to time. In the event of a conflict between the Key Management Annual Incentive Plan and the Omnibus Incentive Compensation Plan, the terms of the Omnibus Incentive Compensation Plan will govern. Questions If you have questions about the Key Management Annual Incentive Plan and how it works, please contact your manager. Your manager will work with you to ensure you understand the Plan so you can maximize your annual award. Incentive Award Incentive awards earned in fiscal year 2012 will be paid to participants within two and one-half months following the end of fiscal 2012, typically within 60 days after the end of the fiscal year. Plan awards are subject to normal tax withholding at a standardized rate and will be deposited to a bank account of your choice. It is the intent that incentive awards fall under the short-term deferral rules of Section 409A of the Internal Revenue Code to exempt the payment of such Key Management Annual Incentive Plan benefits from the requirements of Section 409A. Calculating Payouts For computation purposes, financial goals and actual performance results are rounded to the nearest $1,000. The percent of the financial goal achieved and the percent of target award earned is rounded to the nearest one-tenth of one percent. The actual incentive award is rounded to the nearest dollar. Important Administrative Plan Details If your employment status changes, your Plan participation and any payouts may be affected as described below: 12

• Base Earnings. Your base earnings are defined as your base salary earned during the fiscal year. Base earnings exclude health and welfare benefits, bonus, commission, and incentive payments, overtime and other direct or indirect compensation. Base earnings for Plan participants outside of the U.S. may be defined differently and may vary by country. • Business Unit EBIT. A business unit’s earnings before interest and taxes. • Business Unit Pro Forma EBIT. A business unit’s earnings before interest and taxes, charged/credited for any variation from plan in Net Capital Employed at the weighted average cost of capital. • Corporate Earnings Per Share (EPS). Corporate earnings per share is measured at the end of the fiscal year and is calculated as corporate net income divided by the total number of planned shares outstanding as calculated on a fully diluted basis. Primary Business Unit Participants Corporate Consolidated Chairman, Chief Executive Officer, President and Chief Operating Officer, Corporate-level Senior Vice Presidents and other Section 16 Executive Officers Total Social Expressions Group (SEG) Associates who are part of: • AGI In-Store • Canada • Corporate Staff (Delta, Finance, HR, ISD, Legal) • Creative • Creative Products • Field Sales • Field Sales Operations (FSO) • Global Sourcing • Greeting Cards • Inbound Licensing • Plants • Papyrus-Recycled Greetings • All other North American Greeting Card Division units AG Intellectual Properties Group AGIP Corporate Staff AG Interactive AG Interactive associates AG Properties AG Properties associates UK Greetings UK Greetings associates John Sands Group John Sands Group associates Key Terms The following provides definitions of some common terms used throughout this brochure. Capitalized terms used herein that are not defined will have the meaning set forth in the Omnibus Incentive Compensation Plan. • Corporate Earnings Before Interest and Taxes (Corporate EBIT). Consolidated corporate earnings before interest and taxes, charged/credited for any variation from plan in Net Capital Employed at the weighted average cost of capital. • Corporate Total Revenue. Consolidated corporate net sales and other revenues, including but not limited to royalties, advertising, subscriptions and other revenue streams directly related to the conduct of our principal business. • Eligibility. You are eligible to participate in the Key Management Annual Incentive Plan if you are a Key Manager or Corporatelevel Officer in one of the following primary business units and you do not participate in another Company-sponsored annual incentive plan. • Fiscal Year. March 1 through February 28 or 29 of the following calendar year. • Net Capital Employed (NCE). Assets (minus cash and LIFO reserve) minus liabilities (not including interest-bearing debt, intercompany payables and income taxes). • PLC Definition. Product Line Contribution equals gross sales less all of the following: allowances for obsolete cards (AOC); cost of markdowns and unsaleables; retail allowances; off-invoice discounts; cost of goods sold at standard cost; assortment labor; cost of caption locator cards, displayer and point-ofpurchase materials; cost of SBT scrap and shrink; and the cost of finished goods scrap. • Total Social Expressions Group (SEG). Equals NAGCD pro forma EBIT (includes Corporate Expense) + AGI In-Store pro forma EBIT. 13

Business Unit/Participants Business Unit Components Performance Measure Weight Performance Multipliers1 Primary Unit Sub Unit Primary Unit Sub Unit Primary Unit Sub Unit Corporate Consolidated: Chairman, CEO, President and COO, Corporate-level Senior Vice Presidents and other Section 16 Executive Officers Corporate EBIT 100% 4 Canada, Corporate Staff (Delta, Finance, HR, ISD, Legal), Creative, Creative Products, Field Sales, FSO, Global Sourcing, Greeting Cards, Plants, all other North American Greeting Card Division units Total SEG 100% 4 Inbound Licensing Total SEG AG Interactive pro forma EBIT 50% 50% 4 2 AGI In-Store Total SEG AGI In-Store pro forma EBIT 50% 50% 4 2 Papyrus-Recycled Greetings Total SEG PRG PLC 40% 60% 4 2 AG Intellectual Properties Group – Corporate Staff AG Interactive pro forma EBIT + AG Properties pro forma EBIT 100% 2 AG Interactive AG Interactive pro forma EBIT 100% 2 AG Properties AG Properties pro forma EBIT 100% 2 UK Greetings UK Greetings pro forma EBIT 100% 4 John Sands Group John Sands Group pro forma EBIT 100% 2 Appendix The following section provides additional details about the Plan, including details about the business units, their performance measures and performance multipliers used in the award scales. Please note that some plan participants will have their business unit incentive determined based on performance in two areas. Details about the weightings and performance multipliers for these measures are shown at right and on your personalized Participant Letters, as appropriate 1 For every 1% increase or decrease in the percentage of goal achieved, target award will be adjusted up or down by 1% times the multiplier to determine actual award 14

American Greetings reserves the right to terminate or make changes to the Program, including retroactively, at any time without prior notice to any of the Program’s participants (provided that no amendment to the Program adopted more than 90 days after the beginning of the applicable fiscal year may have the effect of increasing the amount that is or could be payable under the guidelines set forth herein for such fiscal year to any participant who is a “covered employee” of American Greetings as defined in section 162(m)(3) of the Internal Revenue Code). In the case of our executive officers, the Board of Directors (or committee thereof), and in the case of all other participants, the Board of Directors (or committee thereof), the Chief Executive Officer and the Chairman are the only persons who have the authority to alter or amend this Program. Any such alteration or amendment must be done in writing. No participant should rely on an alteration or amendment to this Program unless it is made in writing and signed by the Chief Executive Officer or the Chairman. Any award earned under this Key Management Annual Incentive Plan shall be subject to rescission, cancellation or recoupment, in whole or part, if and to the extent so provided under any “clawback” or similar policy of American Greetings in effect on the date of payment or that may be established thereafter, including, without limitation, any “clawback” or recoupment policy of American Greetings as may be adopted by American Greetings from time to time as required by Section 304 of the Sarbanes-Oxley Act of 2002, Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, or as otherwise required by applicable law. Nothing in this brochure or in any Participant Letter or addendum should be construed to create or imply any contract of employment between an associate and American Greetings and its subsidiaries or to create any binding contractual right to payment of any specific amount under the American Greetings Key Management Annual Incentive Plan. The provisions of this brochure describe the general guidelines used by American Greetings in determining the benefits payable to Plan participants; however, in every case, American Greetings reserves the right to reduce or eliminate the amount that would otherwise be payable to a participant or participants under such guidelines where it determines, in its discretion, that such a reduction is necessary or appropriate, in light of the participant’s performance or other relevant business circumstances. 15

Notes 16

Notes 17

SENIOR EXECUTIVE OFFICER
ADDENDUM TO INDIVIDUAL PERFORMANCE COMPONENT OF
FY2012 AMERICAN GREETINGS KEY MANAGEMENT ANNUAL INCENTIVE PLAN

INDIVIDUAL PERFORMANCE

Notwithstanding the description of the Individual Performance component included in the booklet (the “Plan Booklet”) outlining the Fiscal 2012 Key Management Annual Incentive Plan, the Individual Performance component of American Greetings Key Management Annual Incentive Plan for all Senior Executive Officers of American Greetings, consisting of the Corporation’s Chairman, Chief Executive Officer, President and Chief Operating Officer, Senior Vice Presidents and other Section 16 officers (collectively the “Senior Executive Officers”) is modified by this Addendum as follows:

• Specific award percentages for the individual performance component are replaced with award ranges, thereby giving managers more discretion to adjust the percentage of the individual award based on an individual’s performance.

• Senior Executive Officers who receive an “Exceeds Expectations (Manager Discretion)” performance rating will earn between 150% and 200% of their target award under the individual performance component. Those who receive an “Exceeds Expectations” performance rating will earn between 100% and 150% of their target award under the individual performance component. And those who receive a “Meets Expectations” performance rating will earn between 50% and 100% of their target award under the individual performance component.

As with all participants of the Key Management Annual Incentive Plan, at the end of the fiscal year, managers assess each Senior Executive Officer’s performance compared to other participants. Managers determine the degree to which participants achieved the performance objectives that had been defined at the beginning of the year.

Managers rank participants based on their relative performance and determine actual performance ratings and individual performance awards based on these rankings and the targeted distribution of performance ratings.

• For Senior Executive Officers, the targeted distribution of participants for the “Exceeds Expectations (Manager Discretion)” performance rating is 0% to 10%; the targeted distribution for the “Exceeds Expectation” performance rating is 20% to 30%; the targeted distribution for the “Meets Expectations” performance rating is 60%; and the targeted distribution for the “Improvement Expected / Performance Below Peer Level” is 10%. (See chart on the following page.)

• Senior Executive Officers who receive an “Exceeds Expectations (Manager Discretion)” performance rating will receive between 150% and 200% of their

FY2012 KEY MANAGEMENT ANNUAL INCENTIVE PLAN SENIOR EXECUTIVE OFFICER ADDENDUM

	target individual award, as determined by his or her manager.
•	Senior Executive Officers who receive an “Exceeds Expectations” performance rating will receive between 100% and 150% of their target individual award, as determined by his or her manager.
•	Senior Executive Officers who receive a “Meets Expectations” rating will receive between 50% and 100% of their target individual award, as determined by his or her manager.
•	As with other participants, Senior Executive Officers who receive an “Improvement Expected / Performance Below Peer Level” rating will not receive an individual performance award and will only receive 50% of any award otherwise earned under the corporate and business unit components.

As with other participants, if corporate EPS performance is below the performance threshold, only those Senior Executive Officers with a performance rating of “Exceeds Expectations” or “Exceeds Expectations (Manager Discretion)” may receive awards for the individual performance measure.

• Participants, including Senior Executive Officers, who receive an “Exceeds Expectations” or “Exceeds Expectations (Manager Discretion)” performance rating will receive an award for the individual performance component as shown in the table below.

• Senior Executives who receive a “Meets Expectations” or “Improvement Expected / Below Peer Level” performance rating will not receive any portion of the individual performance award.

The schedule below shows how individual awards will be adjusted based on individual performance.

Except as set forth in this Addendum, the description of the Key Management Annual Incentive Plan included in the Plan Booklet remains unchanged. In the event of a conflict between the terms described in the Plan Booklet and this Addendum, the terms set forth in this Addendum will govern.

	Target Performance	Actual Award
Performance Rating	Rating Distribution	as a % of Target
Exceeds Expectations (Manager Discretion)	0 - 10%	150% - 200%
Exceeds Expectations	20% - 30%	100% - 150%
Meets Expectations	60%	50% - 100%
Improvement Expected / Performance Below Peer Level	10%	0%

EX-10.2

Exhibit 10.2

AMERICAN GREETINGS CORPORATION
2007 OMNIBUS INCENTIVE COMPENSATION PLAN
(AS AMENDED MAY 1, 2011)

ARTICLE 1

DEFINITIONS

In this Plan, except where the context otherwise indicates, the following definitions apply.

1.1 “Agreement” means an agreement in Writing delivered to the Grantee, which evidences a grant of an Award under the Plan.

1.2 “Appreciation Right” means a right granted pursuant to Article 8 of this Plan.

1.3 “Award” means an Option, Share Award, Restricted Share, Deferred Share, Performance Bonus, Performance Share, Directors’ Share, Performance Unit, Appreciation Right or Dividend Equivalents granted under this Plan.

1.4 “Board” means the Board of Directors of the Corporation.

1.5 “Change in Control” means the happening of any of the following events:

(i) the Corporation is merged or consolidated or reorganized into or with another corporation or other legal person, and as a result of such merger, consolidation or reorganization less than a majority of the combined voting power of the then-outstanding securities of such corporation or person immediately after such transaction is held in the aggregate by the holders of Common Stock immediately prior to such transaction;

(ii) the Corporation sells or otherwise transfers all or substantially all of its assets to any other corporation or other legal person, and less than a majority of the combined voting power of the then-outstanding securities of such corporation or person immediately after such transaction is held in the aggregate by the holders of Common Stock immediately prior to such transaction;

(iii) there is a report filed on Schedule 13D or Schedule TO (or any successor schedule, form or report), each as promulgated pursuant to the Exchange Act, disclosing that any person (as the term “person” is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the beneficial owner (as the term “beneficial owner” is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of securities representing 20% or more of the Voting Power;

(iv) the Corporation files a report or proxy statement with the Securities and Exchange Commission pursuant to the Exchange Act disclosing in response to Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) that a Change in Control of the Corporation has occurred; or

(v) if during any period of two consecutive years, individuals who at the beginning of any such period constitute the directors of the Corporation cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by the Corporation’s shareholders, of each director of the Corporation first elected during such period was approved by a vote of at least two-thirds of the directors of the Corporation then still in office who were directors of the Corporation at the beginning of any such period.

(vi) Notwithstanding the foregoing provisions of Section 1.5(iii) and (iv) above, a “Change in Control” shall not be deemed to have occurred for purposes of this Plan (i) solely because (A) the Corporation; (B) a Subsidiary; (C) any Corporation – sponsored employee stock ownership plan or other employee benefit plan of the Corporation; or (D) any family member of Jacob Sapirstein (including lineal descendants, spouses of such descendants, the lineal descendants of any such spouse, the spouses of any such spouses’ lineal descendants and trust (including voting trusts)) either files or becomes obligated to file a report or proxy statement under or in response to Schedule 13D, Schedule TO, Form 8-K or

1

Schedule 14A (or any successor schedule, form or report or item therein) under the Exchange Act, disclosing beneficial ownership by it of shares, whether in excess of 20% of the Voting Power or otherwise, or because the Corporation reports that a Change in Control of the Corporation has or may have occurred or will or may occur in the future by reason of such beneficial ownership or (ii) solely because of a Change in Control of any Subsidiary.

(vii) Notwithstanding the foregoing, if and to the extent that any provision of this Plan or an Award would cause a payment of deferred compensation that is subject to Section 409A(a)(2) of the Internal Revenue Code to be made upon the occurrence of a “Change in Control,” then such payment shall not be made unless such “Change in Control” satisfies the requirements of Section 409A(2)(A)(v) of the Internal Revenue Code and applicable regulations and rulings thereunder.

1.6 “Class A Common Shares” means Class A Common Shares, par value $1.00 per share, of the Corporation.

1.7 “Class B Common Shares” means Class B Common Shares, par value $1.00 per share, of the Corporation.

1.8 “Committee” means (except as otherwise provided or limited in the following sentence), the full Board or the Board’s Compensation and Management Development Committee, or such other committee or designee (including, without limitation, an officer of the Corporation) appointed by the Board or the Compensation and Management Development Committee to manage Awards generally or specific individual or group of Awards. To the extent required by Section 162(m) of the Internal Revenue Code, Rule 16b-3 of the Exchange Act or other similar requirement, any action taken by the Committee shall be taken by the Committee as a whole or by a subcommittee of at least two members, and all the members of the Committee or such subcommittee will be “outside directors” as defined in Treas. Reg. Section 1.162-27(e)(3) or any similar successor regulation and/or “non-employee directors” as defined in Rule 16b-3(b)(3)(i) of the Exchange Act or any similar successor rule. In all other events, the Chairman of the Committee shall be authorized to act on behalf of the Committee unless otherwise determined by the Committee. Except where the context otherwise requires, references in the Plan to the “Committee” also shall be deemed to refer to the Chairman and to any delegate of the Committee while acting within the scope of such delegation.

1.9 “Common Stock” means Class A Common Shares, Class B Common Shares or both.

1.10 “Corporation” means American Greetings Corporation.

1.11 “Covered Employee” means an Eligible Person who is, or is determined by the Committee to become, a “covered employee” within the meaning of Section 162(m) of the Internal Revenue Code (or any successor provision).

1.12 “Deferral Period” means the period of time during which Deferred Shares, Awards or other compensation is subject to deferral limitations under Section 7.3 or Article 13 of this Plan.

1.13 “Deferred Shares” means an Award made pursuant to Section 7.3 of this Plan of the right to receive Common Stock at the end of a specified Deferral Period.

1.14 “Director” means any member of the Board, or any member of a board of directors of a Subsidiary, who is not also an employee of the Corporation or any Subsidiary.

1.15 “Directors’ Share” means a Share awarded to a Director pursuant to Section 7.5 of this Plan.

1.16 “Dividend Equivalent” means an amount determined by multiplying the number of shares of Common Stock subject to a grant by the per-share cash dividend, or the per-share fair market value (as determined by the Committee) of any dividend in consideration other than cash, paid by the Corporation on its Common Stock.

1.17 “Effective Date” means February 13, 2007.

1.18 “Eligible Person” means a key employee, officer or consultant of the Corporation or of a Subsidiary, or a Director, selected by the Committee as eligible to receive an Award under the Plan.

2

1.19 “Exchange Act” means the Securities Exchange Act of 1934 as amended, and the rules and regulations promulgated thereunder.

1.20 “Fair Market Value” means, as of any given date, the closing price of the Class A Common Shares as reported on the New York Stock Exchange (or if the Class A Common Shares are not then traded on the New York Stock Exchange, as reported by such other national securities exchange or quoted on the Nasdaq National Market or such other automated quotation system in which the Class A Common Shares are quoted) as of the close of business on such date or the latest such date in which there is a listing. Fair Market Value shall be determined in a manner that complies with the requirements of Section 409A of the Internal Revenue Code and regulations and rulings thereunder.

1.21 “Grantee” means an Eligible Person to whom an Award has been granted.

1.22 “Grant Date” means

(i) with respect to Options and Appreciation Rights, the date on which such Award is approved by the Committee, or such later date specified by the Committee in authorizing the Award provided that (A) the Eligible Person does not have the ability to individually negotiate the key terms and conditions of the Award with the Corporation or, if so, such negotiations have concluded and (B) the key terms of the Award are expected to be communicated to the Grantee or group of Grantees within a relatively short period of time from the date as of which the Award is authorized to be granted; and

(ii) with respect to all other Awards, the date on which such Award is approved by the Committee, or such later date specified by the Committee in authorizing the Award.

1.23 “Incentive Stock Option” means an Option granted under the Plan that qualifies as an incentive stock option under Section 422 of the Internal Revenue Code (or any successor provision) and that the Corporation designates as such in the Agreement granting the Option.

1.24 “Internal Revenue Code” means the Internal Revenue Code of 1986 as amended, and the rules and regulations promulgated thereunder.

1.25 “Nonstatutory Stock Option” means an Option granted under the Plan that is not an Incentive Stock Option.

1.26 “Option” means an option to purchase Shares granted under the Plan in accordance with the terms of Article 6 of this Plan.

1.27 “Option Period” means the period during which an Option may be exercised.

1.28 “Option Price” means the price per Share at which an Option may be exercised. The Option Price for any Option will equal the Fair Market Value on the Grant Date, unless otherwise determined by the Committee in its discretion pursuant to an Option that contains terms and conditions that satisfy (or qualify such Option for an exemption from) the applicable requirements of Section 409A of the Internal Revenue Code.

1.29 “Optionee” means an Eligible Person to whom an Option has been granted.

1.30 “Performance Criteria” means the performance standards selected by the Committee that may be based on revenue; gross margin; product line contribution; operating and other expenses; operating earnings; earnings before interest, taxes, depreciation and amortization (“EBITDA”); earnings before interest and taxes (“EBIT”); pre-tax or after-tax profits; net income; earnings per share; cash flow; productivity; return on assets; return on capital; return on equity; cash flow/net assets; debt/capital ratio; return on net capital employed (“RONCE”); sales growth; stock price appreciation; or total shareholder return (share appreciation plus dividends as if reinvested), and may be absolute in their terms or measured against or in relationship to changes from period to period or against or in relationship to other companies comparably, similarly or otherwise situated.

1.31 “Performance Period” means the period or periods, which may be of overlapping durations, during which each Performance Criterion of Qualified Performance-Based Compensation or other performance

3

criterion of a performance-based Award will be measured against the Performance Criteria or other performance goals established by the Committee and specified in the Agreement relating thereto.

1.32 “Performance Bonus” means an award granted pursuant to Article 9 of this Plan.

1.33 “Performance Share” means a bookkeeping entry that records the equivalent of one Common Share awarded pursuant to Section 7.4 of this Plan.

1.34 “Performance Unit” means a bookkeeping entry that records a unit equivalent to $1.00 awarded pursuant to Section 7.4 of this Plan.

1.35 “Plan” means this American Greetings Corporation 2007 Omnibus Incentive Compensation Plan which is the Plan set forth in this document, as amended from time to time.

1.36 “Potential Change in Control” shall be deemed to have occurred if the event set forth in any one of the following paragraphs shall have occurred:

(i) the Corporation enters into an agreement, the consummation of which would result in the occurrence of a Change in Control;

(ii) the commencement of a proxy contest in which any person (as such term is defined in Section 3(9) of the Exchange Act and also includes any group deemed to be a person under Section 13(d)(3) of the Exchange Act) seeks to replace or remove a majority of the members of the Board;

(iii) the Board otherwise adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control has occurred; or

(iv) the Corporation files a report or proxy statement with the Securities and Exchange Commission pursuant to the Exchange Act disclosing in response to Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) that a Change in Control of the Corporation may or will occur in the future.

1.37 “Qualified Performance-Based Compensation” means any compensation that is intended to qualify as “qualified performance-based compensation” as described in Section 162(m)(4)(C) of the Internal Revenue Code.

1.38 “Related Award” means the Award in connection with which a Related Right is granted.

1.39 “Related Right” means an Appreciation Right granted in connection with a specified Award or by amendment of an outstanding Nonstatutory Stock Option granted under the Plan.

1.40 “Restricted Share” means a Share awarded to an Eligible Person pursuant to Section 7.2 of this Plan that is subject to certain restrictions and may be subject to forfeiture.

1.41 “Right Period” means the period during which an Appreciation Right may be exercised.

1.42 “Securities Act” means the Securities Act of 1933 as amended, and the rules and regulations promulgated thereunder.

1.43 “Share” means a share of authorized but unissued Common Stock, Common Stock held in treasury or a reacquired share of Common Stock, including shares purchased by the Corporation on the open market for purposes of the Plan or otherwise.

1.44 “Share Award” means an award of Common Stock, or an Award denominated in terms of Common Stock, as described in Article 7 of this Plan, and includes, without limitation, a Restricted Share, a Directors’ Share, a Deferred Share and a Performance Share.

1.45 “Subsidiary” means an entity which is a member of a “controlled group” or under “common control” with the Corporation as determined under Section 414(b) or (c) of the Internal Revenue Code, except that an entity will be deemed to be in a controlled group or under common control with the Corporation for this purpose if the Corporation either directly or indirectly owns at least 50% (or 20% with legitimate business

4

criteria) of the total combined voting power of all classes of stock (or similar interests) of such entity or would otherwise satisfy the definition of service recipient under Section 409A of the Internal Revenue Code.

1.47 “Voting Power” means at any time, the total votes relating to the then-outstanding securities entitled to vote generally in the election of directors of the Corporation.

1.48 “Writing” means any paper or electronic means of documenting the terms of an Agreement hereunder which satisfies such requirements for formality, authenticity and verification of signature and authority as may be established by the Committee or by those persons responsible for performing administrative functions under the Plan.

ARTICLE 2

PURPOSE

The Plan is intended to promote the success and enhance the value of the Corporation by linking the personal interests of Directors, officers and other key employees and consultants to those of the Corporation’s shareholders and by providing flexibility to the Corporation in its ability to motivate, attract and retain the services of Directors, officers and other key employees and consultants upon whose judgment, interest and special effort the successful conduct of the Corporation’s operations is largely dependent.

ARTICLE 3

PLAN MANAGEMENT AND ADMINISTRATION

The Plan will be managed by the Committee. Administrative functions may include, without limitation, documenting and communicating Awards made hereunder, maintaining records concerning such Awards, and satisfying (or assisting Eligible Persons in satisfying) any applicable reporting, disclosure, tax filing or withholding, or other legal requirements concerning Awards. Each member of the Committee is entitled to, in good faith, rely or act upon any report or other information furnished to that member by any officer or other employee of the Corporation or any Subsidiary, the Corporation’s independent registered public accounting firm or other certified public accountants, or any executive compensation consultant or other professional retained to assist in the administration of the Plan. In addition to any other powers granted to the Committee, it will have the following management powers, subject to the express provisions of the Plan:

3.1 to determine in its discretion the Eligible Persons or group of Eligible Persons to whom Awards will be granted;

3.2 to determine the types of Awards to be granted;

3.3 to determine the number of Awards to be granted to an Eligible Person or to a group of Eligible Persons and the number of Shares to be subject to each Award or pool of Awards;

3.4 to determine the terms and conditions of any Award, including, but not limited to, the Option Price, grant price, or purchase price, any restrictions or limitations on the Award, any schedule for lapse of forfeiture restrictions or restrictions on the exercisability of an Award, and accelerations or waivers thereof, and any provisions related to non-competition and recapture of gain on an Award, based in each case on considerations as the Committee in its sole discretion determines;

3.5 to construe and interpret any Agreement and the Plan;

3.6 to require, whether or not provided for in the pertinent Agreement, of any Grantee, the making of any representations or agreements that the Committee may deem necessary or advisable in order to comply with, or qualify for advantageous treatment under, applicable securities, tax, or other laws;

3.7 to provide for satisfaction of a Grantee’s tax liabilities arising in connection with the Plan through, without limitation, retention by the Corporation of Shares otherwise issuable on the exercise of, or pursuant to, an Award or through delivery of Common Stock to the Corporation by the Grantee under such terms and

5

conditions as the Committee deems appropriate, including but not limited to any Share attestation procedure approved or ratified by the Committee or by delivery of a properly executed notice together with irrevocable instructions to a broker to promptly deliver to the Corporation the amount of sale or loan proceeds to pay the tax liabilities, provided that in any case the Share amount retained will not exceed the minimum applicable required withholding tax rate for federal (including FICA), state or local tax liability;

3.8 to make all other determinations and take all other actions necessary or advisable for the management and administration of the Plan, including but not limited to establishing, adopting or revising any rules and regulations as it may deem necessary;

3.9 to delegate to officers or managers of the Corporation or any Subsidiary the authority to make Awards to Eligible Persons, to select such Eligible Persons, and to determine such terms and conditions thereof as may be specified in such delegation, from a pool of Awards authorized by the Committee;

3.10 to condition the grant of any Award or combination of Awards authorized under this Plan on the surrender or deferral by the Eligible Person of his or her right to receive a cash bonus or other compensation otherwise payable by the Corporation or a Subsidiary to the Grantee; and

3.11 without limiting the generality of the foregoing, to provide in its discretion in an Agreement:

(i) for an agreement by the Grantee to render services to the Corporation or a Subsidiary upon such terms and conditions as may be specified in the Agreement, provided that the Committee will not have the power under the Plan to commit the Corporation or any Subsidiary to employ or otherwise retain any Optionee or Grantee;

(ii) for restrictions on the transfer, sale or other disposition of Shares issued to the Grantee;

(iii) for an agreement by the Grantee to resell to the Corporation, under specified conditions, Shares issued in connection with an Award;

(iv) for the payment of the Option Price upon the exercise of an Option otherwise than in cash, including without limitation by delivery of Common Stock valued at Fair Market Value on the exercise date of the Option or a combination of cash and Common Stock; by means of any Share attestation procedure approved or ratified by the Committee; or by delivery of a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Corporation the amount of sale proceeds to pay the exercise price;

(v) for the deferral of receipt of amounts that otherwise would be distributed upon exercise or payment of an Award, the terms and conditions of any such deferral and any interest or Dividend Equivalent or other payment that will accrue with respect to deferred distributions, subject to the provisions of Article 13 of this Plan; and

(vi) for the effect of a Change in Control or Potential Change of Control, as defined herein, of the Corporation on the rights of a Grantee with respect to any Award.

(vii) Any determinations or actions made or taken by the Committee pursuant to this Article will be binding and final.

ARTICLE 4

ELIGIBILITY

Eligible Persons may be granted one or more Awards; provided, however, that Incentive Stock Options will not be granted to Directors.

6

ARTICLE 5

SHARES SUBJECT TO THE PLAN

5.1 Subject to adjustment as provided in Article 14 of this Plan and Section 5.3 below, the number of Shares that may be issued or transferred (i) upon the exercise of Options or Appreciation Rights; (ii) as Share Awards; (iii) as Restricted Shares and released from substantial risk of forfeiture thereof; (iv) as Deferred Shares; (v) in payment of Performance Shares or Performance Units that have been earned; (vi) as Directors’ Shares; or (vii) in payment of Dividend Equivalents paid with respect to awards made under the Plan, shall not exceed in the aggregate 5,600,000 Class A Common Shares and 1,200,000 Class B Common Shares, respectively. Such Shares may be shares of original issuance or treasury shares or a combination of the foregoing.

5.2 Subject to adjustment as provided in Article 14 of this Plan, grants of Incentive Stock Options under the Plan may not be made with respect to more than 5,600,000 Class A Common Shares and 1,200,000 Class B Common Shares during any calendar year, provided that such limits only apply to the extent consistent with applicable regulations relating to Incentive Stock Options under the Internal Revenue Code. With respect to one fiscal year, (i) subject to adjustment as provided in Article 14 of this Plan an Eligible Person shall not receive Appreciation Rights in excess of 500,000 Class A Common Shares and 500,000 Class B Common Shares; (ii) an Eligible Person shall not receive an award of Performance Shares or Performance Units having an aggregate maximum value as of their respective Grant Date in excess of $5,000,000; and (iii) subject to adjustment as provided in Article 14 of this Plan, an Eligible Person shall not receive Awards in excess, in the aggregate, of 500,000 Class A Common Shares and 500,000 Class B Common Shares and collectively 500,000 Shares (“Individual Limit”).

5.3 Shares underlying outstanding Awards made under the Plan will be available for subsequent issuance under the Plan to the extent those Awards are forfeited, expire or terminate for any reason prior to the issuance of the Shares subject to those Awards. Shares issued under the Plan subject to a vesting requirement and subsequently forfeited or repurchased by the Corporation, at a price per Share not greater than the original issue price paid per Share, pursuant to the Corporation’s repurchase rights under the Plan or the applicable Agreement will be added back to the number of Shares reserved for issuance under the Plan and accordingly will be available for subsequent reissuance. Should the exercise price of an Option under the Plan be paid with Shares, then the authorized reserve of Common Stock under the Plan will be reduced by the gross number of Shares for which that Option is exercised, and not by the net number of Shares issued under the exercised Option. If Shares otherwise issuable under the Plan are withheld by the Corporation in satisfaction of the withholding taxes incurred in connection with the exercise of an Option, Appreciation Right or issuance of fully-vested Shares under another type of Award, then the number of Shares available for issuance under the Plan will be reduced by the gross number of Shares issuable under the exercised Option or Appreciation Right or the gross number of fully-vested Shares issuable under another type of Award, calculated in each instance prior to any such share withholding. Notwithstanding the foregoing, any Award or portion of an Award that in accordance with the terms of the applicable Agreement, is payable only in cash immediately will be added back to the number of Shares reserved for issuance under the Plan and accordingly will be available for subsequent reissuance.

5.4 Where two or more Awards are granted in relation to each other such that the exercise or payment of one such Award automatically and by its terms reduces the number of Shares that may be issued or the amount that may be received pursuant to the other Award or Awards, then the amount that will be included for purposes of the Individual Limit set forth in Section 5.2 of this Plan for such Awards will be the amount that is the maximum number of Shares that could be issued or received pursuant to such Awards and their related Awards taken as a whole, and only the maximum number of Shares that could be issued pursuant to such Awards will be counted against the number of Shares reserved under the Plan at the time of their grant.

5.5 In the case of any Award granted in substitution for an award of a business, corporation or other entity acquired by the Corporation or a Subsidiary, Shares issued or issuable in connection with such substitution will not be counted against the number of Shares reserved under the Plan, but will be available

7

under the Plan by virtue of the Corporation’s assumption of the plan or arrangement of the acquired business, corporation or other entity.

ARTICLE 6

OPTIONS

6.1 The Committee is hereby authorized to grant Incentive Stock Options and Nonstatutory Stock Options to any employee who is an Eligible Person and to grant Nonstatutory Stock Options to any Director, provided that the number of Options granted to an Eligible Person during a fiscal year will not exceed the applicable limitations set forth in Article 5 of this Plan when aggregated with other Awards made to that Eligible Person during that fiscal year.

6.2 All Options will be evidenced by an Agreement. All Agreements granting Incentive Stock Options will contain a statement that the Option is intended to be an Incentive Stock Option; if no such statement is included in the Agreement, or if the Agreement affirmatively states that the Option is intended to be a Nonstatutory Stock Option, the Option shall be a Nonstatutory Stock Option.

6.3 All Agreements shall specify the number of Class A Common Shares or Class B Common Shares to which it pertains subject to the limitations set forth in Article 5 of this Plan.

6.4 The Option Period will be determined by the Committee and specifically set forth in the Agreement, provided that an Option will not be exercisable after ten years from the Grant Date.

6.5 The Committee will, at or after the Grant Date, determine the methods by which the Option Price of an Option may be paid and the form or forms of payment that may be permitted.

6.6 The Committee may provide in the Agreement evidencing the grant of an Option that the Committee, in its sole discretion, will have the right to substitute an Appreciation Right for such Option at any time prior to or upon exercise of such Option; provided, however, that such Appreciation Right will be exercisable with respect to the same number of Shares for which such substituted Option would have been exercisable.

6.7 The Committee may provide in the Agreement evidencing a grant of Options (other than Incentive Stock Options) that the Committee, in its sole discretion, will have the right to provide for the payment of Dividend Equivalents to the Optionee on either a current, deferred, or contingent basis or may provide that such equivalents shall be credited against the Option Price.

6.8 The exercise of an Option shall result in the cancellation on a share-for-share basis of any Related Right authorized under Article 8 of this Plan.

6.9 Except as otherwise determined by the Committee and set forth in an Agreement, if a Director subsequently becomes an employee of the Corporation or a Subsidiary while remaining a member of the Board, any Options held under the Plan by such individual at the time of such commencement of employment shall not be affected thereby. If an employee who is also a Director terminates employment, any Awards granted in connection with such individual’s employment will continue to be governed by and subject to the provisions of the Plan and the Agreement regarding a termination of employment.

6.10 All other terms of Options granted under the Plan will be determined by the Committee in its sole discretion.

ARTICLE 7

SHARE AWARDS, PERFORMANCE UNITS AND DIRECTORS’ AWARDS

7.1 The Committee is authorized to grant Share Awards to any Eligible Person in such amounts and subject to such terms and conditions as determined by the Committee, provided that the number of Shares awarded to an Eligible Person during a fiscal year will not exceed the applicable limitations set forth in Article 5 of this Plan when aggregated with other Share Awards made to that Eligible Person during that fiscal

8

year. All Share Awards will be evidenced by an Agreement. Shares issued or transferred pursuant to a Share Award may be issued or transferred for consideration or no consideration (except as required by applicable law).

7.2 Except as otherwise determined by the Committee and set forth in an Agreement, Restricted Shares are subject to the following terms and conditions:

(i) Each such grant shall constitute an immediate transfer of the ownership of Common Stock to the Eligible Person in consideration for the performance of services, entitling such Eligible Person to voting, dividend and other ownership rights consistent with the Corporation’s Articles of Incorporation, Code of Regulations and other corporate documents as applicable to and governing Class A Common Shares and Class B Common Shares, but subject to the substantial risk of forfeiture and restrictions on transfer hereinafter referred to and subject to any requirement that requires any or all dividends or other distributions paid with respect to Restricted Shares be automatically deferred and reinvested in additional Restricted Shares, which may be subject to the same restrictions as the underlying award.

(ii) Each such grant may be made without additional consideration or in consideration of a payment by such Eligible Person that is more or less than Fair Market Value per Share at the Grant Date.

(iii) Each such grant shall provide that the Restricted Shares covered by such grant shall be subject to a “substantial risk of forfeiture” within the meaning of Section 83 of the Internal Revenue Code. Each such grant shall provide that during the period for which such substantial risk of forfeiture is to continue the transferability of the Restricted Shares shall be prohibited or restricted in the manner and to the extent prescribed by the Committee at the Grant Date. Except as otherwise determined by the Committee at the time of the grant of Restricted Shares or thereafter, upon termination of employment or service with or for the Corporation and/or Subsidiaries during the applicable restriction period, Restricted Shares that are at that time subject to restrictions will be forfeited.

(iv) Any grant of Restricted Shares may specify Performance Criteria or other performance goals which, if achieved, will result in termination or early termination of the restrictions applicable to such shares, and each grant may specify in respect of such specified Performance Criteria or other performance goals, a minimum acceptable level of achievement and shall set forth a formula for determining the number of Restricted Shares on which the restrictions will terminate if performance is at or above the minimum level, but falls short of full achievement of the specified Performance Criteria or other performance goals.

(v) If certificates representing Restricted Shares are registered in the name of the Grantee, those certificates must bear an appropriate legend referring to the terms, conditions and restrictions applicable to such Restricted Shares, and the Corporation may, at its discretion, retain physical possession of certificates until such time as all applicable restrictions lapse.

7.3 Except as otherwise determined by the Committee and set forth in an Agreement, Deferred Shares are subject to the following terms and conditions:

(i) Each such grant shall constitute the agreement by the Corporation to deliver Common Stock to the Eligible Person in the future in consideration of the performance of services, but subject to the fulfillment of such conditions during the Deferral Period as the Committee may specify.

(ii) Each such grant may be made without additional consideration or in consideration of a payment by such Eligible Person that is more or less than Fair Market Value per Share at the Grant Date.

(iii) Each such grant shall be subject to a Deferral Period of not less than one year, as determined by the Committee at the Grant Date except (if the Committee shall so determine) in the event of a Change in Control or other similar transaction or event.

(iv) During the Deferral Period, an Eligible Person shall have no right to transfer any rights under his or her award, shall have no rights of ownership in the Deferred Shares and shall have no right to vote them, but the Committee may, at or after the Grant Date, authorize the payment of Dividend Equivalents

9

on such shares on either a current, deferred, or contingent basis, either in cash or in additional Common Stock.

(v) Each grant shall be consistent with Section 409A of the Internal Revenue Code, as the Committee may approve.

7.4 Except as otherwise determined by the Committee and set forth in an Agreement, Performance Shares or Performance Units are subject to the following terms and conditions:

(i) The Performance Period with respect to each Performance Share and Performance Unit shall be such period of time designated in the Agreement (as shall be determined by the Committee at the time of grant) commencing with the Grant Date.

(ii) Any grant of Performance Shares and Performance Units shall specify Performance Criteria or other performance goals which, if achieved, will result in payment or early payment of the Award, and each grant may specify in respect of such specified Performance Criteria or other performance goals a minimum acceptable level of achievement and shall set forth a formula for determining the number of Performance Shares or Performance Units that will be earned if performance is at or above the minimum level, but falls short of full achievement or the specified Performance Criteria or other performance goals.

(iii) Each grant shall specify the time and manner of payment of Performance Shares or Performance Units that have been earned. Any grant may specify that the amount payable with respect thereto may be paid by the Corporation in cash, in Class A Common Shares or Class B Common Shares or in any combination thereof and may either grant to the Eligible Person or retain in the Committee the right to elect among those alternatives.

(iv) The Committee may, at or after the Grant Date, provide for the payment of Dividend Equivalents to the holder thereof on either a current, deferred or contingent basis, either in cash or in additional Common Stock.

7.5 Subject to the applicable limitations set forth in Article 5 of this Plan, Directors may elect to receive Class A or Class B Common Shares, as determined by the Board, in an amount equal to (and in lieu of) any or all fees owed to them by the Corporation as compensation for serving on the Corporation’s Board. For the purposes of this Section 7.5, Shares are valued at the closing price reported on the New York Stock Exchange (or if the Class A Common Shares are not then traded on the New York Stock Exchange, as reported by such other national securities exchange or quoted on the Nasdaq National Market or such other automated quotation system in which the Class A Common Shares are quoted) on the last trading day of the calendar quarter prior to payment of such fees. Any fractional shares shall be paid as cash.

ARTICLE 8

APPRECIATION RIGHTS

8.1 The Committee may grant Appreciation Rights to any Eligible Person, upon such terms and conditions as the Committee deems appropriate under this Article 8, provided that the number of Appreciation Rights granted to an Eligible Person during a fiscal year will not exceed the applicable limitations set forth in Article 5 of this Plan when aggregated with other Appreciation Rights made to that Eligible Person during that fiscal year.

8.2 An Appreciation Right may be granted under the Plan:

(i) in connection with, and at the same time as, the grant of an Option to an Eligible Person;

(ii) by amendment of an outstanding Nonstatutory Stock Option granted under the Plan to an Eligible Person; or

(iii) independently of any Option granted under the Plan.

10

An Appreciation Right granted under clause (i) or (ii) of the preceding sentence is a Related Right. A Related Right may, in the Committee’s discretion, apply to all or a portion of the Options subject to the Related Award.

8.3 An Appreciation Right may be exercised in whole or in part as provided in the Agreement, and, subject to the provisions of the Agreement, entitles its Grantee to receive, without any payment to the Corporation (other than required tax withholding amounts), either cash or that number of Shares (equal to the highest whole number of Shares), or a combination thereof, in an amount or having a Fair Market Value determined as of the date such Appreciation Right is exercised not to exceed the number of shares underlying the Appreciation Right exercised multiplied by an amount equal to the excess of the Fair Market Value on the exercise date of the Appreciation Right over the “base price”, which is the Fair Market Value on the Grant Date of the Appreciation Right (or such price in excess of Fair Market Value on the Grant Date as the Committee determined at the time of grant).

8.4 The Right Period will be determined by the Committee and specifically set forth in the Agreement, provided, however that an Appreciation Right that is a Related Right may be exercised only when and to the extent the Related Award is exercisable.

8.5 The exercise or settlement, in whole or in part, of a Related Right will cause a reduction on a share-for-share basis in any Related Award.

8.6 The Committee may specify Performance Criteria or other performance goals that must be achieved as a condition of the exercise of such rights.

8.7 Each grant of Appreciation Rights shall be evidenced by an Agreement that identifies the related Options (if applicable) and contains such terms and provisions, consistent with this Plan, as the Committee may approve.

ARTICLE 9

PERFORMANCE BONUSES

The Committee may grant Performance Bonuses under the Plan in the form of cash or Shares to Eligible Persons that the Committee may from time to time select, in the amounts and pursuant to the terms and conditions that the Committee may determine, subject to the provisions below:

9.1 Performance Bonuses will be awarded in connection with a Performance Period, the length of which will be determined by the Committee.

9.2 The Committee will determine the persons who will be eligible to receive a Performance Bonus under the Plan.

9.3 Performance Criteria or other performance goals, performance targets and other award criteria shall be determined as follows:

(i) The Committee will fix and establish (A) the performance goals that will apply to that Performance Period; (B) the target amount payable to each Eligible Person; and (C) subject to Section 9.4 below, the criteria for computing the amount that will be paid with respect to each level of attained performance. The Committee may also set forth the minimum level of performance, based on objective factors, that must be attained during the Performance Period before any Performance Bonus will be paid and the percentage of the target amount that will become payable upon attainment of various levels of performance that equal or exceed any minimum required level.

(ii) The Committee may, in its discretion, select performance goals that measure the performance of the Eligible Person, the Corporation or one or more business units, divisions or Subsidiaries of the Corporation. The Committee may select performance goals that are absolute or relative to the performance of one or more comparable companies or an index of comparable companies. The performance goals may be described in terms of company-wide objectives or objectives that are related to the performance of the individual Eligible

11

Person or of the Subsidiary, division, department, region or function within the Corporation or Subsidiary in which the Eligible Person is employed.

9.4 In applying the performance goals, the Committee may, in its discretion, exclude unusual or infrequently occurring items (including any event listed in Article 14 of this Plan and the cumulative effect of changes in the law, regulations or accounting rules), and may determine to exclude other items, each determined in accordance with GAAP (to the extent applicable) and as identified in the financial statements, notes to the financial statements or discussion and analysis of management.

9.5 All such Performance Bonuses shall be paid no later than the 15th day of the third month following the end of the calendar year (or, if later, following the end of the Corporation’s fiscal year) in which such Performance Bonuses are no longer subject to a substantial risk of forfeiture (as determined for purposes of Section 409A of the Internal Revenue Code). The Committee may provide that Awards will be payable, in whole or in part, in the event of the Grantee’s death or disability, a Change of Control or under other circumstances.

ARTICLE 10

QUALIFIED PERFORMANCE-BASED COMPENSATION

10.1 The Committee may determine that an Award or Awards granted to an Eligible Person will be considered “qualified performance-based compensation” under Section 162(m) of the Internal Revenue Code. The provisions of this Article 10 apply only to any such Awards that are to be considered “qualified performance-based compensation” under Section 162(m) of the Internal Revenue Code. To the extent that Awards designated as “qualified performance-based compensation” under Section 162(m) of the Internal Revenue Code are made, no such Award may be made as an alternative to another Award that is not also designated as “qualified performance-based compensation” but instead must be separate and apart from all other Awards made.

10.2 When Options or Appreciation Rights that are to be considered “qualified performance-based compensation” are granted, the Committee approving such grants must consist solely of two or more “outside directors” as defined in Treas. Reg. Section 1.162-27(e)(3), and the Option Price or base price, as the case may be, established for the grant by the Committee will not be less than the Fair Market Value on the Grant Date.

10.3 When Awards other than Options or Appreciation Rights that are to be considered “qualified performance-based compensation” are granted, the Committee will establish in writing (i) the Performance Criteria that must be met, (ii) the Performance Period during which performance will be measured, (iii) the maximum amounts that may be paid if the Performance Criteria are met, and (iv) any other conditions that the Committee deems appropriate and consistent with the Plan and the requirements of Section 162(m) of the Internal Revenue Code for “qualified performance-based compensation.” The Performance Criteria will satisfy the requirements for “qualified performance-based compensation,” including the requirement that the achievement of the goals be substantially uncertain at the time they are established and that the Performance Criteria be established in such a way that a third party with knowledge of the relevant facts could determine whether and to what extent the Performance Criteria have been met. The Committee will not have discretion to increase the maximum amount of compensation that is payable upon achievement of the designated Performance Criteria, but the Committee may in its discretion reduce the amount of compensation that is payable to an Eligible Person upon achievement of the designated Performance Criteria.

10.4 The Committee will establish the Performance Criteria in writing either before the beginning of the Performance Period or during a period ending no later than the earlier of (i) 90 days after the beginning of the Performance Period or (ii) the date on which 25% of the Performance Period has been completed, or such other date as may be required or permitted under applicable regulations under Section 162(m) of the Internal Revenue Code.

12

10.5 The Committee will certify and announce the results for the Performance Period to all affected Grantees after the Corporation determines the financial and other relevant performance results for the Performance Period. The Committee will determine the amount, if any, to be paid pursuant to each Award based on the achievement of the Performance Criteria and the terms of each Agreement.

10.6 The Committee may provide that Awards will be payable, in whole or in part, in the event of the Grantee’s death or disability, a Change of Control or under other circumstances consistent with the Treasury regulations and rulings under Section 162(m) of the Internal Revenue Code.

ARTICLE 11

TRANSFERABILITY

11.1 Except as otherwise determined by the Committee on a case-by-case basis, no Options, Appreciation Rights or other derivative security granted under the Plan shall be transferable by an Optionee other than by will or the laws of descent and distribution. Except as otherwise determined by the Committee on a case-by-case basis, Options and Appreciation Rights shall be exercisable during the Optionee’s lifetime only by him or her or by his or her guardian or legal representative.

11.2 The Committee may specify at the Grant Date that part or all of the Common Stock that is (i) to be issued or transferred by the Corporation upon the exercise of Option grants or Appreciation Rights, upon the termination of the Deferral Period applicable to Deferred Shares or upon payment under any grant of Performance Shares or Performance Units or (ii) no longer subject to the substantial risk of forfeiture and restrictions on transfer referred to in Section 7.2 of this Plan, shall be subject to further restrictions on transfer.

11.3 The Grantee acknowledges that the Plan is intended to conform to the extent necessary with all provisions of the Securities Act, the Exchange Act, and any and all regulations and rules promulgated thereunder, or by the Securities and Exchange Commission, and state securities laws and regulations. Notwithstanding anything herein to the contrary, the Plan shall be administered and Awards may be granted and exercised only in such manner to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan and any Agreement shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.

ARTICLE 12

EXERCISE; PAYMENT OF WITHHOLDING TAXES

An Award that is exercisable by the Grantee may, subject to the provisions of the Agreement under which it was granted, be exercised in whole or in part by the delivery to the Corporation of written notice of the exercise, in such form as the Committee may prescribe. The exercise, however, will not be effective until the Corporation has received the election notice and will be subject to receipt by the Corporation of payment of any applicable Option Price or other amount due in connection with such exercise, calculation by the Corporation of the applicable withholding taxes, and receipt by the Corporation of payment for any applicable withholding taxes.

ARTICLE 13

DEFERRAL OF AWARDS OR COMPENSATION

13.1 If a Grantee so elects in accordance with the terms of an Agreement, the Grantee may defer (i) any or all of an amount otherwise payable in connection with an Award or (ii) any payment of a cash bonus or other compensation in exchange for an Award under this Plan, provided that:

(i) the Grantee makes such election by delivering to the Corporation written notice of such election, at such time and in such form as the Committee may from time to time prescribe in accordance with the deferral requirements set forth in Section 409A of the Internal Revenue Code;

13

(ii) such election will be irrevocable;

(iii) such deferred payment will be made in accordance with the provisions of such deferred compensation plan; and

(iv) the terms of the deferred compensation plan and the election to defer under this Plan comply with Section 409A of the Internal Revenue Code.

13.2 The Committee may also provide that deferral issuances and settlements include the payment or crediting of Dividend Equivalents or interest on the deferral amounts. Nothing in this Plan shall be deemed to limit an Eligible Person’s ability to defer compensation under any other deferred compensation plan, arrangement or Agreement maintained by the Corporation.

ARTICLE 14

CAPITAL ADJUSTMENTS

The number and class of Shares subject to each outstanding Share Award, the Option Price, the base price for any Appreciation Right or other Award using such a price, the aggregate number and class of Shares for which grants of Share Awards thereafter may be made or in which Awards may be paid, and the limits provided for in Article 5 of this Plan, will be subject to such adjustment, if any, as the Committee in its sole discretion deems appropriate to reflect any corporate transaction or event, including, without limitation, dividends, Share splits, spin-offs, split-ups, recapitalizations, mergers, consolidations or reorganizations of or by the Corporation.

ARTICLE 15

CONSEQUENCES OF A CHANGE IN CONTROL

OR POTENTIAL CHANGE IN CONTROL

15.1 In the event of a Change in Control or Potential Change in Control, in addition to such other actions contemplated herein, the Committee may take any one or more of the following actions with respect to any or all outstanding Awards, without the consent of any Eligible Person: (i) the Committee may determine that outstanding Options and Appreciation Rights shall be fully exercisable, and restrictions on outstanding Restricted Shares, Deferred Shares, Performance Shares and Performance Units shall lapse, as of the date of the Change in Control or at such other time as the Committee determines, (ii) the Committee may require that Eligible Persons surrender their outstanding Options and Appreciation Rights in exchange for one or more payments by the Corporation, in cash or Common Stock as determined by the Committee, in an amount equal to the amount by which the then Fair Market Value of the shares of Common Stock subject to the Eligible Persons’ unexercised Options and Appreciation Rights exceeds the exercise price, if any, and on such terms as the Committee determines, (iii) after giving Eligible Persons an opportunity to exercise their outstanding Options and Appreciation Rights, the Committee may terminate any or all unexercised Options and Appreciation Rights at such time as the Committee deems appropriate, (iv) with respect to Grantees holding Share Awards, Directors’ Shares, Performance Units or Dividend Equivalents, the Committee may determine that such Grantees shall receive one or more payments in settlement of such Share Awards, Directors’ Shares and Performance Units, in such amount and form and on such terms as may be determined by the Committee, or (v) the Committee may determine that Awards that remain outstanding after the Change in Control shall be converted to similar grants of, or assumed by, the surviving corporation (or a parent or subsidiary of the surviving corporation or successor). Such acceleration, surrender, termination, settlement or conversion shall take place as of the date of the Change in Control or such other date as the Committee may specify.

15.2 The Committee may provide in an Agreement that a sale or other transaction involving a Subsidiary or other business unit of the Corporation shall be considered a Change in Control for purposes of an Award, or the Committee may establish other provisions that shall be applicable in the event of a specified transaction.

14

ARTICLE 16

TERMINATION OR AMENDMENT

16.1 The Board or the Committee may amend, alter or terminate this Plan in any respect, at any time; provided, however, that no amendment, alteration or termination of this Plan will be made by the Board or the Committee without approval of (i) the Corporation’s shareholders to the extent shareholder approval of the amendment is required by applicable law or regulations or the requirements of the principal exchange or interdealer quotation system on which the Common Stock is listed or quoted, and (ii) each affected Optionee or Grantee if such amendment, alteration or termination would adversely affect his or her rights or obligations under any Award made prior to the date of such amendment, alteration or termination except as otherwise permitted under Articles 15 and 19 of this Plan.

16.2 The effective date of any amendment to the Plan will be the date specified by the Board or Committee, as applicable. Any amendments to the Plan requiring shareholder approval pursuant to this Article 16 are subject to approval by vote of the shareholders of the Corporation within twelve months after their adoption by the Board or the Committee. Subject to that approval, any such amendments are effective as of the date on which they are adopted by the Board. Awards may be granted or awarded prior to shareholder approval of amendments, but each Award requiring such amendments will be subject to the approval of the amendments by the shareholders. The date on which any Award made prior to shareholder approval of the amendment will be the Grant Date for all purposes of the Plan as if the Award had not been subject to approval. No Award granted subject to shareholder approval of an amendment may be exercised prior to such shareholder approval, and any dividends payable thereon are subject to forfeiture if such shareholder approval is not obtained. Presentation of this Plan or any amendment hereof for shareholder approval shall not be construed to limit the Corporation’s authority to offer similar or dissimilar benefits under other plans without shareholder approval.

16.3 Neither the Board nor the Committee shall, without further approval of the shareholders of the Corporation, authorize the amendment of any outstanding Option to reduce the Option Price. Furthermore, no Option shall be canceled and replaced with awards having a lower Option Price without further approval of the shareholders of the Corporation. This Section 16.3 is intended to prohibit the repricing of “underwarter” Options and shall not be construed to prohibit the adjustments provided for in Section 14 of this Plan.

16.4 Neither the Board nor the Committee shall, without further approval of the shareholders of the Corporation, authorize any Option grant to provide for automatic “reload” rights, the automatic grant of Options to the Optionee upon the exercise of Options using Shares or other equity.

ARTICLE 17

TERM OF THE PLAN

Unless sooner terminated by the Board or the Committee pursuant to Article 16 of this Plan, the Plan will terminate ten years after the date on which the Plan was first approved by the shareholders of the Corporation. The termination will not affect the validity of any Awards outstanding on the date of termination. Awards may be granted or awarded prior to shareholder approval of this Plan, but any Award requiring such shareholder approval will be subject to approval of the Plan by the shareholders. No Award granted subject to such shareholder approval, and any dividends payable thereon, are subject to forfeiture if such shareholder approval is not obtained.

ARTICLE 18

INDEMNIFICATION OF COMMITTEE

In addition to such other rights of indemnification as they may have as directors or as members of the Committee, the members of the Committee will be indemnified by the Corporation against the reasonable expenses, including attorneys’ fees, actually and reasonably incurred in connection with the defense of any

15

action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan or any Awards granted hereunder, and against all amounts reasonably paid by them in settlement thereof or paid by them in satisfaction of a judgment in any such action, suit or proceeding, if such members acted in good faith and in a manner which they believed to be in, and not opposed to, the best interests of the Corporation.

ARTICLE 19

COMPLIANCE WITH SECTION 409A OF THE INTERNAL REVENUE CODE

To the extent the Committee determines that any Award granted under the Plan is subject to Section 409A of the Internal Revenue Code, the Agreement evidencing such Award will incorporate the terms and conditions required by Section 409A of the Internal Revenue Code. To the extent applicable, the Plan and Agreement will be interpreted in accordance with Section 409A of the Internal Revenue Code and Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the Effective Date. Notwithstanding any provision of the Plan, in the event that following the Effective Date the Committee determines that any Award may be subject to Section 409A of the Internal Revenue Code, the Committee may adopt such amendments to the Plan and/or the applicable Agreement or adopt policies and procedures or take any other action or actions, including an action or amendment with retroactive effect, that the Committee determines is necessary or appropriate to (i) exempt the Award from the application of Section 409A of the Internal Revenue Code or (ii) comply with the requirements of Section 409A of the Internal Revenue Code.

ARTICLE 20

GENERAL PROVISIONS

20.1 The establishment of the Plan will not confer upon any Eligible Person any legal or equitable right against the Corporation, any Subsidiary or the Committee, except as expressly provided in the Plan.

20.2 All grants and awards under the Plan are subject to the condition subsequent that an appropriate Agreement be signed by the parties.

20.3 Neither the Plan nor any Agreement constitutes inducement or consideration for the employment or retention of any Eligible Person, nor are they a contract of employment or retention for a specific term between the Corporation or any Subsidiary and any Eligible Person. Participation in the Plan will not give an Eligible Person any right to be retained in the service of the Corporation or any Subsidiary as an employee, a director or otherwise.

20.4 The Corporation and its Subsidiaries may assume options, warrants, or rights to purchase shares issued or granted by other corporations or entities whose shares or assets are acquired by the Corporation or its Subsidiaries, or which are merged into or consolidated with the Corporation or its Subsidiaries. Neither the adoption of this Plan, nor its submission to the shareholders, will be taken to impose any limitations on the powers of the Corporation or its affiliates to issue, grant, or assume options, warrants, or rights, otherwise than under this Plan, or to adopt other share option or restricted share plans or other incentives, or to impose any requirement of shareholder approval upon the same.

20.5 Except as the Committee may otherwise provide, or as may otherwise be required by a deferral election pursuant to Article 13 of this Plan, the interests of any Eligible Person under the Plan are not subject to the claims of creditors and may not, in any way, be assigned, alienated or encumbered.

20.6 The Board or the Committee may, in its sole discretion, delegate authority hereunder not already delegated by the terms hereof, including but not limited to delegating authority to select Eligible Persons, to grant Awards, to establish terms and conditions of Awards, or to amend, manage, administer, interpret, construe or vary the Plan or any Awards or Agreements, to the extent permitted by applicable law or administrative or regulatory rule.

16

20.7 The Committee may, without amending the Plan, determine the terms and conditions applicable to grants of Awards to Grantees who are foreign nationals or employed outside the United States in a manner otherwise inconsistent with the Plan if the Board deems such terms and conditions necessary in order to recognize differences in local law or regulations, tax policies or customs.

20.8 The Plan will be governed, construed and administered in accordance with the laws of the State of Ohio, without reference to its conflict of laws provisions, and it is the intention of the Corporation that Incentive Stock Options granted under the Plan qualify as such under Section 422 of the Internal Revenue Code and that Qualified Performance-Based Compensation granted under the Plan qualify as “qualified performance-based compensation” as described in Section 162(m) of the Internal Revenue Code.

17

EX-31.A

Exhibit 31 (a)

Certification of Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Zev Weiss, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of American Greetings Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of American Greetings Corporation as of, and for, the periods presented in this report;
4.	American Greetings Corporation’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for American Greetings Corporation and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to American Greetings Corporation, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of American Greetings Corporation’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in American Greetings Corporation’s internal control over financial reporting that occurred during American Greetings Corporation’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, American Greetings Corporation’s internal control over financial reporting; and

5. American Greetings Corporation’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to American Greetings Corporation’s auditors and the audit committee of American Greetings Corporation’s board of directors:

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect American Greetings Corporation’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in American Greetings Corporation’s internal control over financial reporting.

July 6, 2011	/s/ Zev Weiss
	Zev Weiss
	Chief Executive Officer (principal executive officer)

EX-31.B

Exhibit 31 (b)

Certification of Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Stephen J. Smith, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of American Greetings Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of American Greetings Corporation as of, and for, the periods presented in this report;
4.	American Greetings Corporation’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for American Greetings Corporation and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to American Greetings Corporation, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of American Greetings Corporation’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in American Greetings Corporation’s internal control over financial reporting that occurred during American Greetings Corporation’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, American Greetings Corporation’s internal control over financial reporting; and

5. American Greetings Corporation’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to American Greetings Corporation’s auditors and the audit committee of American Greetings Corporation’s board of directors:

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect American Greetings Corporation’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in American Greetings Corporation’s internal control over financial reporting.

July 6, 2011	/s/ Stephen J. Smith
	Stephen J. Smith
	Senior Vice President and Chief Financial Officer (principal financial officer)

EX-32

Exhibit 32

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with this quarterly report of American Greetings Corporation on Form 10-Q as filed with the Securities and Exchange Commission on the date therein specified (the “Report”), each of the undersigned certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of American Greetings Corporation.

July 6, 2011

/s/ Zev Weiss  

Zev Weiss 

Chief Executive Officer
(principal executive officer) 

/s/ Stephen J. Smith  

Stephen J. Smith 

Senior Vice President and
Chief Financial Officer
(principal financial officer) 

EX-99.1

Exhibit 99.1

IN THE COMMON PLEAS COURT
OF CUYAHOGA COUNTY, OHIO

ELECTRICAL WORKERS PENSION FUND,	)	Case No. 09-cv-687985
LOCAL 103, I.B.E.W., Derivatively on Behalf	)	Judge Peter J. Corrigan
of AMERICAN GREETINGS	)
CORPORATION,	)	NOTICE OF PROPOSED SETTLEMENT OF
Plaintiff,	)	SHAREHOLDER DERIVATIVE ACTION
	)
vs.	)
	)
MORRY WEISS, et al.,	)
	)
Defendants,	)
	)
— and —	)
	)
AMERICAN GREETINGS CORPORATION,	)
an Ohio corporation,	)
	)
Nominal Defendant.	)
	)
	)

TO:	ALL CURRENT RECORD HOLDERS AND BENEFICIAL OWNERS OF COMMON STOCK OF AMERICAN GREETINGS CORPORATION (“AMERICAN GREETINGS” OR THE “COMPANY”) AS OF JUNE 17, 2011 (THE “RECORD DATE”) (“CURRENT AMERICAN GREETINGS SHAREHOLDERS”)
	PLEASE READ THIS NOTICE CAREFULLY AND IN ITS ENTIRETY. THIS NOTICE RELATES TO A PROPOSED SETTLEMENT AND DISMISSAL OF THE ABOVE-CAPTIONED SHAREHOLDERS’ DERIVATIVE ACTION AND CONTAINS IMPORTANT INFORMATION REGARDING YOUR RIGHTS. YOUR RIGHTS MAY BE AFFECTED BY THESE LEGAL PROCEEDINGS. IF THE COURT APPROVES THE SETTLEMENT, YOU WILL BE FOREVER BARRED FROM CONTESTING THE APPROVAL OF THE PROPOSED SETTLEMENT AND FROM PURSUING THE RELEASED CLAIMS.
	IF YOU HOLD AMERICAN GREETINGS COMMON STOCK FOR THE BENEFIT OF ANOTHER, PLEASE PROMPTLY TRANSMIT THIS DOCUMENT TO SUCH BENEFICIAL OWNER.
	THE COURT HAS MADE NO FINDINGS OR DETERMINATIONS CONCERNING THE MERITS OF THE ACTION. THE RECITATION OF THE BACKGROUND AND CIRCUMSTANCES OF THE SETTLEMENT CONTAINED HEREIN DOES NOT CONSTITUTE THE FINDINGS OF THE COURT. IT IS BASED ON REPRESENTATIONS MADE TO THE COURT BY COUNSEL FOR THE PARTIES.

     Notice is hereby provided to you of the proposed settlement (the “Settlement”) of this shareholder derivative lawsuit. This Notice is provided by Order of the Common Pleas Court of Cuyahoga County, Ohio (the “Court”). It is not an expression of any opinion by the Court. It is to notify you of the terms of the proposed Settlement, and your rights related thereto.

I. WHY THE COMPANY HAS ISSUED THIS NOTICE

     Your rights may be affected by the Settlement of the derivative action styled Electrical Workers Pension Fund Local 103, I.B.E.W. v. Weiss, et al., Case No. 09-cv-687985. Plaintiff Electrical Workers Pension Fund, Local 103, I.B.E.W. (“Plaintiff”), individual defendants Morry Weiss, Jeffrey Weiss, Zev Weiss, Scott S. Cowen, Joseph S. Hardin, Jr., Charles A. Ratner, Jerry Sue Thornton, Joseph B. Cipollone, Stephen R. Hardis,

-1-

and Harriet Mouchly-Weiss (“Individual Defendants”), and nominal party American Greetings (American Greetings and the Individual Defendants collectively, “Defendants”), have agreed upon terms to settle the Action on the terms set forth in the Stipulation of Settlement dated June 17, 2011 (“Stipulation”) which can be viewed and/or downloaded at http://investors.americangreetings.com.

     On September 16, 2011, at 10:30 a.m., the Court will hold a hearing (the “Final Hearing”) in the Action. The purpose of the Final Hearing is to determine: (i) whether the terms of the Settlement are fair, reasonable, and adequate and should be approved; (ii) whether a final judgment should be entered; and (iii) such other matters as may be necessary or proper under the circumstances.

II. SUMMARY OF THE ACTION

     On March 20, 2009, Plaintiff filed a shareholder derivative action in the Common Pleas Court of Cuyahoga County, Ohio (the “Court”), captioned Electrical Workers Pension Fund Local 103, I.B.E.W. v. Weiss, et al., Case No. 09-cv-687985 (the “Action”). Plaintiff’s complaint alleged causes of action for breach of fiduciary duties, abuse of control, gross mismanagement, constructive fraud, corporate waste, and unjust enrichment on the basis of allegations that certain of American Greetings’ historical stock option grants were “backdated” in contravention of the Company’s governing stock option plans and applicable laws.

     On April 17, 2009, Defendants removed the case to the United States District Court for the Northern District of Ohio (“District Court”). On June 2, 2009, Plaintiff moved to remand the case back to this Court. On March 1, 2010, the District Court remanded the case back to the Court.

     After remand, Defendants immediately moved to transfer the case to the Common Plea Court’s Commercial Docket. After briefing on the matter, the Court denied the motion.

-2-

Thereafter, Defendants appealed the Court’s ruling to the Administrative Presiding Judge, and, after briefing, Judge Fuerst rejected the appeal. Then, on April 2, 2010, Defendants filed a Writ of Prohibition and Mandamus in the Ohio Supreme Court over the judges’ orders precluding transfer of the case to the Commercial Docket. Plaintiff intervened and moved to dismiss the Writ. That motion was denied after briefing. During the remainder of 2010, the Settling Parties submitted further briefing and evidence, and amicus briefs were also filed. On December 1, 2010, the Ohio Supreme Court dismissed Defendants’ Writ.

     During the pendency of the Writ, Plaintiff propounded document requests on the Individual Defendants and the Company. Defendants produced thousands of pages of documents in response to Plaintiff’s request. Plaintiff’s Counsel reviewed and analyzed the documents produced and determined that certain documents that were sought, were in fact, not produced. Accordingly, after extensive meet and confers with counsel for Defendants, Plaintiff filed a motion to compel production of documents upon return of the case from the Ohio Supreme Court. Following a case management conference on December 22, 2010, the Court set trial for February 21, 2012, with a fact discovery cutoff of July 1, 2011.

     After remand of the Action, the parties began discussing settlement. On January 26, 2011, the parties participated in mediation before Justice Howard B. Wiener (Ret.). With the substantial assistance of Justice Wiener, the Settling Parties reached an agreement-in-principle to settle the Action. Thereafter, the Settling Parties continued negotiations and reached an agreement to settle the Action on the terms set forth in the Stipulation and summarized in this Notice.

III. TERMS OF THE PROPOSED DERIVATIVE SETTLEMENT

     The principal terms, conditions, and other matters that are part of the Settlement, are summarized below. This summary should be read in conjunction with, and is qualified in its

-3-

entirety by reference to, the text of the Stipulation, which has been filed with the Court and can be viewed and/or downloaded at http://investors.americangreetings.com.

     The Settling Parties, with the substantial assistance of the mediator, the Honorable Howard B. Wiener (Ret.) Justice of the California Court of Appeals, have reached an agreement to resolve the Action. The Settlement includes valuable corporate governance benefits for American Greetings and its shareholders, as detailed below.

     1. American Greetings and Plaintiff have conducted extensive, arm’s-length negotiations and have reached agreement regarding various corporate governance issues, including internal controls and procedures at the Company. As a result of the filing, prosecution, and settlement of the Action, the Company will or has, among other things, revised option measurement dates, improved internal controls, changed its board composition and practices, changed compensation practices, including stock option plans and option granting practices and procedures, adopted a policy regarding forfeiture of incentive-based compensation, and established an independent Audit Committee. American Greetings and the Individual Defendants acknowledge and agree that the Action was a material causal factor in the Company’s decision to implement these measures and American Greetings further acknowledges and agrees that these measures are significant and extensive and confer substantial benefits upon American Greetings and its shareholders by, among other things, helping to prevent the manipulation of stock options and other equity awards in the future.

     2. The Stipulation also provides for the entry of judgment dismissing the Action against American Greetings and the Individual Defendants with prejudice and, as explained in more detail in the Stipulation, barring and releasing certain known or unknown claims that have been or could have been brought in any court by the Plaintiff in the Action or by American Greetings or any of its shareholders, derivatively against American Greetings and

-4-

the Individual Defendants relating to any of the claims or matters that were or could have been alleged concerning American Greetings’ stock option granting practices, disclosures or any other matter related to the allegations in the Action.

IV. PLAINTIFF’S COUNSEL’S ATTORNEYS’ FEES AND EXPENSES

     After negotiating the corporate governance measures, counsel for the Plaintiff and the Company, with the substantial assistance of the mediator, the Honorable Howard B. Wiener (Ret.), negotiated the attorneys’ fees and expenses that American Greetings would pay to Plaintiff’s Counsel. As a result of these negotiations, and in light of the substantial benefit conferred, American Greetings has agreed to pay or cause to be paid as part of the Settlement, $3 million to Plaintiff’s Counsel for their fees and expenses. To date, Plaintiff’s Counsel have not received any payments for their efforts on behalf of American Greetings shareholders. The Fee and Expense Award will compensate Plaintiff’s Counsel for their efforts in prosecuting this Action and the substantial benefits achieved for American Greetings and its shareholders.

V. REASONS FOR THE SETTLEMENT

     The Court did not decide in favor of Plaintiff or Defendants. The proposed Settlement was negotiated at length by attorneys for the parties with the substantial assistance of Judge Wiener. The attorneys for all of the parties have extensive experience in shareholder derivative cases, and they all believe the Settlement is in the best interest of their clients. American Greetings and the Plaintiff believe that the Settlement provides substantial benefits upon American Greetings and its shareholders.

A. Why Did Plaintiff Agree to Settle?

     Plaintiff’s Counsel conducted an extensive investigation relating to the claims and the underlying events and transactions alleged in the Action. Plaintiff’s Counsel have analyzed the evidence adduced during their investigation, and have researched the applicable law with

-5-

respect to the claims of the Plaintiff and American Greetings and its shareholders against the Defendants and the potential defenses thereto.

     Based upon their investigation as set forth above, Plaintiff and its counsel have concluded that the terms and conditions of the Stipulation are fair, reasonable, and adequate to Current American Greetings Shareholders, and American Greetings, and in their best interests, and have agreed to settle the claims raised in the Action pursuant to the terms and provisions of the Stipulation after considering, among other things: (a) the substantial benefits that American Greetings and its shareholders have received or will receive from the Settlement, (b) the attendant risks of continued litigation of the Action, (c) actions taken by the Company and its Board of Directors in response to alleged options dating issues at American Greetings, and (d) the desirability of permitting the Settlement to be consummated.

     In particular, Plaintiff and its counsel considered the significant litigation risk inherent in this shareholder derivative action. The law imposes significant burdens on plaintiffs for pleading and proving a shareholder derivative claim. While Plaintiff believes its claims are meritorious, Plaintiff acknowledges that there is a substantial risk that the Action may not succeed in producing a recovery in light of the applicable legal standards and possible defenses. Plaintiff and its counsel believe that, under the circumstances, they have obtained the best possible relief for American Greetings and its shareholders.

B. Why Did the Defendants Agree to Settle?

     The Individual Defendants have strenuously denied, and continue strenuously to deny, each and every allegation of liability made against them or that could have been made against them in the Action, and assert that they have meritorious defenses to those claims and that judgment should be entered dismissing all claims against them with prejudice. The Individual Defendants have thus entered into the Stipulation solely to avoid the continuing

-6-

additional expense, inconvenience, and distraction of this burdensome litigation and to avoid the risks inherent in any lawsuit, and without admitting any wrongdoing or liability whatsoever.

VI. FINAL HEARING

     On September 16, 2011, at 10:30 a.m., the Court will hold the Final Hearing at 1200 Ontario Street, Cleveland, Ohio. At the Final Hearing, the Court will consider whether the terms of the Settlement are fair, reasonable, and adequate and thus should be finally approved and whether the Action should be dismissed with prejudice pursuant to the Stipulation.

VII. RIGHT TO ATTEND FINAL HEARING

     Any Current American Greetings Shareholder may, but is not required to, appear in person at the Final Hearing. If you want to be heard at the Final Hearing, then you must first comply with the procedures for objecting, which are set forth below. The Court has the right to change the hearing date or time without further notice. Thus, if you are planning to attend the Final Hearing, you should confirm the date and time before going to the Court. CURRENT AMERICAN GREETINGS SHAREHOLDERS WHO HAVE NO OBJECTION TO THE SETTLEMENT DO NOT NEED TO APPEAR AT THE FINAL HEARING OR TAKE ANY OTHER ACTION.

VIII. RIGHT TO OBJECT TO THE SETTLEMENT AND PROCEDURES FOR DOING SO

     You have the right to object to any aspect of the Settlement. You must object in writing, and you may request to be heard at the Final Hearing. If you choose to object, then you must follow these procedures.

A. You Must Make Detailed Objections in Writing

     Any objections must be presented in writing and must contain the following information:

-7-

     1. Your name, legal address, and telephone number;

     2. Proof of being a Current American Greetings Shareholder as of the Record Date;

     3. The date(s) you acquired your American Greetings shares;

     4. A statement of your position with respect to the matters to be heard at the Final Hearing, including a statement of each objection being made;

     5. The grounds for each objection or the reasons for your desiring to appear and to be heard;

     6. Notice of whether you intend to appear at the Final Hearing (this is not required if you have lodged your objection with the Court); and

     7. Copies of any papers you intend to submit to the Court, along with the names of any witness(es) you intend to call to testify at the Final Hearing and the subject(s) of their testimony.

     8. The Court may not consider any objection that does not substantially comply with these requirements.

B. You Must Timely Deliver Written Objections to the Court, Plaintiff’s Counsel, and Defendants’ Counsel

     YOUR WRITTEN OBJECTIONS MUST BE ON FILE WITH THE CLERK OF THE COURT NO LATER THAN September 2, 2011. The Court Clerk’s address is:

Clerk of the Court
Cuyahoga County Common Pleas Court
1200 Ontario Street
Cleveland, OH 44113

     YOU ALSO MUST DELIVER COPIES OF THE MATERIALS TO PLAINTIFF’S COUNSEL AND COUNSEL FOR DEFENDANTS SO THEY ARE RECEIVED NO LATER THAN September 2, 2011. Counsel’s addresses are:

-8-

Counsel for Plaintiff

Jeffrey D. Light
ROBBINS GELLER RUDMAN & DOWD LLP
655 West Broadway, Suite 1900
San Diego, CA 92101

Counsel for Individual Defendants

Carl E. Volz
KATTEN MUCHIN ROSENMAN LLP
525 West Monroe, Suite 1600
Chicago, IL 60661

Counsel for Nominal Defendant American Greetings Corporation

John D. Parker
BAKER HOSTETLER
PNC Center
1900 East 9th Street, Suite 3200
Cleveland, Ohio 44114-3482

Unless the Court orders otherwise, your objection will not be considered unless it is timely filed with the Court and delivered to Plaintiff’s Counsel and counsel for Defendants.

     Any Person or entity who fails to object or otherwise request to be heard in the manner prescribed above will be deemed to have waived the right to object to any aspect of the Settlement or otherwise request to be heard (including the right to appeal) and will be forever barred from raising such objection or request to be heard in this or any other action or proceeding, unless otherwise ordered by the Court.

IX. HOW TO OBTAIN ADDITIONAL INFORMATION

     This Notice summarizes the Stipulation. It is not a complete statement of the events of the Action or the Stipulation.

     You may inspect the Stipulation and other papers in the Action at the Clerk’s office at any time during regular business hours of each business day. The Clerk’s office is located at Cuyahoga County Common Pleas Court, 1200 Ontario Street, Cleveland, Ohio.

-9-

     PLEASE DO NOT CALL, WRITE, OR OTHERWISE DIRECT QUESTIONS TO EITHER THE COURT OR THE CLERK’S OFFICE. Any questions you have about matters in this Notice should be directed by telephone to 800/449-4900 or in writing to Rick Nelson, Shareholder Relations, Robbins Geller Rudman & Dowd LLP, 655 West Broadway, Suite 1900, San Diego, CA 92101.

DATED June 30, 2011 BY ORDER OF THE COURT
COURT OF COMMON PLEAS
CUYAHOGA COUNTY, OHIO

-10-

XML



Document and Entity Information (USD $)	3 Months Ended
	May 27, 2011	Aug. 27, 2010	Jul. 01, 2011 Class A	Jul. 01, 2011 Class B
Entity Registrant Name	AMERICAN GREETINGS CORP
Entity Central Index Key	0000005133
Document Type	10-Q
Document Period End Date	May 27, 2011
Amendment Flag	false
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q1
Current Fiscal Year End Date	--02-28
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Public Float		$ 729,061,401
Entity Common Stock, Shares Outstanding			37,867,369	2,802,513

XML



Comprehensive Income

3 Months Ended

May 27, 2011

Comprehensive Income [Abstract]

Comprehensive Income

Note 6 — Comprehensive Income

The Corporation’s total comprehensive income is as follows:

	Three Months Ended
(In thousands)	May 27, 2011			May 28, 2010
Net income	$	32,593		$	30,839
Other comprehensive income (loss):
Foreign currency translation adjustments		4,482			(8,998	)
Pension and postretirement benefit adjustments, net of tax		(16	)		(1,445	)
Unrealized gain on securities, net of tax		1			1
Total comprehensive income	$	37,060		$	20,397

XML



Customer Allowances and Discounts

3 Months Ended

May 27, 2011

Customer Allowances and Discounts [Abstract]

Customer Allowances and Discounts

Note 7 — Customer Allowances and Discounts

Trade accounts receivable are reported net of certain allowances and discounts. The most significant of these are as follows:

(In thousands)	May 27, 2011		February 28, 2011		May 28, 2010
Allowance for seasonal sales returns	$	36,098	$	34,058	$	38,019
Allowance for outdated products		8,207		8,264		8,118
Allowance for doubtful accounts		5,932		5,374		3,188
Allowance for cooperative advertising and marketing funds		29,432		25,631		26,248
Allowance for rebates		31,862		24,920		24,318
	$	111,531	$	98,247	$	99,891

Certain customer allowances and discounts are settled in cash. These accounts, primarily rebates, which are classified as “Accrued liabilities” on the Consolidated Statement of Financial Position, totaled $13.5 million, $11.9 million and $11.3 million as of May 27, 2011, February 28, 2011 and May 28, 2010, respectively.

XML



Inventories

3 Months Ended

May 27, 2011

Inventories [Abstract]

Inventories

Note 8 — Inventories

(In thousands)	May 27, 2011		February 28, 2011		May 28, 2010
Raw materials	$	24,539	$	21,248	$	19,287
Work in process		13,091		6,476		9,701
Finished products		225,886		212,056		185,097
		263,516		239,780		214,085
Less LIFO reserve		79,465		78,358		75,834
		184,051		161,422		138,251
Display materials and factory supplies		19,295		18,308		19,662
	$	203,346	$	179,730	$	157,913

The valuation of inventory under the Last-In, First-Out (LIFO) method is made at the end of each fiscal year based on inventory levels and costs at that time. Accordingly, interim LIFO calculations, by necessity, are based on estimates of expected fiscal year-end inventory levels and costs, and are subject to final fiscal year-end LIFO inventory calculations.

Inventory held on location for retailers with scan-based trading arrangements, which is included in finished products, totaled $51.4 million, $42.1 million and $40.8 million as of May 27, 2011, February 28, 2011 and May 28, 2010, respectively.

XML



Deferred Costs

3 Months Ended

May 27, 2011

Deferred Costs [Abstract]

Deferred Costs

Note 9 — Deferred Costs

Deferred costs and future payment commitments for retail supply agreements are included in the following financial statement captions:

(In thousands)	May 27, 2011			February 28, 2011			May 28, 2010
Prepaid expenses and other	$	78,366		$	88,352		$	75,198
Other assets		319,536			327,311			298,371
Deferred cost assets		397,902			415,663			373,569
Other current liabilities		(62,998	)		(64,116	)		(52,980	)
Other liabilities		(72,523	)		(76,301	)		(47,298	)
Deferred cost liabilities		(135,521	)		(140,417	)		(100,278	)
Net deferred costs	$	262,381		$	275,246		$	273,291

The Corporation maintains an allowance for deferred costs related to supply agreements of $10.4 million, $10.7 million and $12.2 million at May 27, 2011, February 28, 2011 and May 28, 2010, respectively. This allowance is included in “Other assets” on the Consolidated Statement of Financial Position.

XML



Debt

3 Months Ended

May 27, 2011

Debt [Abstract]

Debt

Note 10 — Debt

As of May 27, 2011, the Corporation was party to an amended and restated $350 million secured credit agreement and to an amended and restated receivables purchase agreement that has available financing of up to $80 million. There were no balances outstanding under the Corporation’s credit facility or receivables purchase agreement at May 27, 2011 and February 28, 2011. The Corporation had, in the aggregate, $31.8 million outstanding under letters of credit under these borrowing agreements, which reduces the total credit available to the Corporation thereunder.

There was no debt due within one year as of May 27, 2011 and February 28, 2011. Debt due within one year as of May 28, 2010 was $99 million.

Long-term debt and their related calendar year due dates, net of unamortized discounts which totaled $21.6 million, $22.2 million and $23.9 million as of May 27, 2011, February 28, 2011 and May 28, 2010, respectively, were as follows:

(In thousands)	May 27, 2011		February 28, 2011		May 28, 2010
7.375% senior notes, due 2016	$	213,323	$	213,077	$	212,386
7.375% notes, due 2016		19,794		19,430		18,404
6.10% senior notes, due 2028		181		181		181
Other		—		—		2
	$	233,298	$	232,688	$	230,973

The total fair value of the Corporation’s publicly traded debt, based on quoted market prices, was $240.8 million (at a carrying value of $233.3 million), $237.5 million (at a carrying value of $232.7 million) and $238.5 million (at a carrying value of $231.0 million) at May 27, 2011, February 28, 2011 and May 28, 2010, respectively.

The total fair value of the Corporation’s non-publicly traded debt, term loan and revolving credit facility, based on comparable privately traded debt prices, was $99 million (at a carrying value of $99 million) at May 28, 2010.

At May 27, 2011, the Corporation was in compliance with the financial covenants under its borrowing agreements.

XML



Retirement Benefits

3 Months Ended

May 27, 2011

Retirement Benefits [Abstract]

Retirement Benefits

Note 11 — Retirement Benefits

The components of periodic benefit cost for the Corporation’s defined benefit pension and postretirement benefit plans are as follows:

	Defined Benefit Pension						Postretirement Benefit
	Three Months Ended						Three Months Ended
(In thousands)	May 27, 2011			May 28, 2010			May 27, 2011			May 28, 2010
Service cost	$	204		$	251		$	363		$	575
Interest cost		2,146			2,213			1,210			1,550
Expected return on plan assets		(1,672	)		(1,660	)		(1,098	)		(1,125	)
Amortization of prior service cost (credit)		59			44			(638	)		(1,850	)
Amortization of actuarial loss		569			526			—			250
	$	1,306		$	1,374		$	(163	)	$	(600	)

The Corporation has a discretionary profit-sharing plan with a 401(k) provision covering most of its United States employees. The profit-sharing plan expense for the three months ended May 27, 2011 was $3.7 million, compared to $3.5 million in the prior year period. The Corporation also matches a portion of 401(k) employee contributions. The expense recognized for the 401(k) match was $1.4 million and $1.1 million for the three months ended May 27, 2011 and May 28, 2010, respectively. The profit-sharing plan and 401(k) matching expenses for the three month periods are estimates as actual contributions are determined after fiscal year-end.

At May 27, 2011, February 28, 2011 and May 28, 2010, the liability for postretirement benefits other than pensions was $25.6 million, $24.1 million and $46.8 million, respectively, and is included in “Other liabilities” on the Consolidated Statement of Financial Position. At May 27, 2011, February 28, 2011 and May 28, 2010, the long-term liability for pension benefits was $59.9 million, $60.1 million and $58.7 million, respectively, and is included in “Other liabilities” on the Consolidated Statement of Financial Position.

XML



Fair Value Measurements

3 Months Ended

May 27, 2011

Fair Value Measurements [Abstract]

Fair Value Measurements

Note 12 — Fair Value Measurements

Assets and liabilities measured at fair value are classified using the fair value hierarchy based upon the transparency of inputs as of the measurement date. The classification of fair value measurements within the hierarchy is based upon the lowest level of input that is significant to the measurement. The three levels are defined as follows:

• Level 1 — Valuation is based upon quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2 — Valuation is based upon quoted prices for similar assets and liabilities in active markets, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

• Level 3 — Valuation is based upon unobservable inputs that are significant to the fair value measurement.

The following table shows the Corporation’s assets and liabilities measured at fair value as of May 27, 2011:

	May 27, 2011		Level 1		Level 2		Level 3
Assets measured on a recurring basis:
Active employees’ medical plan trust assets	$	3,277	$	3,277	$	—	$	—
Deferred compensation plan assets (1)		8,688		8,688		—		—
Total	$	11,965	$	11,965	$	—	$	—
Assets measured on a nonrecurring basis:
Assets held for sale	$	5,282	$	—	$	5,282	$	—
Total	$	5,282	$	—	$	5,282	$	—

The following table shows the Corporation’s assets and liabilities measured at fair value as of February 28, 2011:

	February 28, 2011		Level 1		Level 2		Level 3
Assets measured on a recurring basis:
Active employees’ medical plan trust assets	$	3,223	$	3,223	$	—	$	—
Deferred compensation plan assets (1)		6,871		6,871		—		—
Total	$	10,094	$	10,094	$	—	$	—
Assets measured on a nonrecurring basis:
Assets held for sale	$	5,282	$	—	$	5,282	$	—
Total	$	5,282	$	—	$	5,282	$	—

The following table shows the Corporation’s assets and liabilities measured at fair value as of May 28, 2010:

	May 28, 2010		Level 1		Level 2		Level 3
Assets measured on a recurring basis:
Active employees’ medical plan trust assets	$	4,025	$	4,025	$	—	$	—
Deferred compensation plan assets (1)		5,963		5,963		—		—
Total	$	9,988	$	9,988	$	—	$	—
Assets measured on a nonrecurring basis:
Assets held for sale	$	5,557	$	—	$	5,557	$	—
Total	$	5,557	$	—	$	5,557	$	—

(1) There is an offsetting liability for the obligation to its employees on the Corporation’s books.

The fair value of the investments in the active employees’ medical plan trust was considered a Level 1 valuation as it is based on the quoted market value per share of each individual security investment in an active market.

The deferred compensation plan includes mutual fund assets. Assets held in mutual funds were recorded at fair value, which was considered a Level 1 valuation as it is based on each fund’s quoted market value per share in an active market. Although the Corporation is under no obligation to fund employees’ nonqualified accounts, the fair value of the related non-qualified deferred compensation liability is based on the fair value of the mutual fund.

Certain assets are measured at fair value on a nonrecurring basis and are subject to fair value adjustments only in certain circumstances. During the fourth quarter of 2010, assets held for sale relating to the Corporation’s party goods product lines, including land and buildings, were written down to fair value of $5.9 million, less cost to sell of $0.3 million, or $5.6 million. During the fourth quarter of 2011, these assets were subsequently re-measured and an additional impairment charge of $0.3 million was recorded. Re-assessment in the current period indicated no change to the fair value of these assets. The fair value of the assets held for sale was considered a Level 2 valuation as it was based on observable selling prices for similar assets that were sold within the past twelve to eighteen months. In addition, land, buildings and certain equipment associated with a distribution facility in the International Social Expression Products segment have been reclassified to “Assets held for sale” on the Consolidated Statement of Financial Position, for all periods presented, as these assets met the criteria to be classified as such during 2011. Bids from third parties for the purchase of these assets exceed current book value, therefore no adjustments to the carrying values were required. The assets included in “Assets held for sale” are expected to sell within one year.

XML



Income Taxes

3 Months Ended

May 27, 2011

Income Taxes [Abstract]

Income Taxes

Note 13 — Income Taxes

The Corporation’s provision for income taxes in interim periods is computed by applying its estimated annual effective tax rate against income before income tax expense for the period. In addition, non-recurring or discrete items are recorded during the period in which they occur. The magnitude of the impact that discrete items have on the Corporation’s quarterly effective tax rate is dependent on the level of income in the period. The effective tax rate was 35.8% and 39.6% for the three month periods ended May 27, 2011 and May 28, 2010, respectively. During the prior year quarter, the Corporation recognized the deferred tax effects of the reduced deductibility of the postretirement prescription drug coverage due to the enacted U.S. Patient Protection and Affordable Care Act, which increased the Corporation’s income tax expense by $1.6 million.

At February 28, 2011, the Corporation had unrecognized tax benefits of $43.3 million that, if recognized, would have a favorable effect on the Corporation’s income tax expense of $32.8 million. There were no significant changes to this amount during the first quarter of 2012. It is reasonably possible that the Corporation’s unrecognized tax positions as of February 28, 2011 could decrease approximately $9.5 million during the next twelve months due to anticipated settlements and resulting cash payments related to open years after 1996, which are currently under examination.

The Corporation recognizes interest and penalties accrued on unrecognized tax benefits and refundable income taxes as a component of income tax expense. During the first quarter of 2012, the Corporation recognized net expense of $0.5 million for interest and penalties on unrecognized tax benefits and refundable income taxes. As of May 27, 2011, the total amount of gross accrued interest and penalties related to unrecognized tax benefits less refundable income taxes was a net payable of $16.9 million.

The Corporation is subject to examination by the U.S. Internal Revenue Service and various U.S. state and local jurisdictions for tax years 1996 to the present. The Corporation is also subject to tax examination in various international tax jurisdictions, including Canada, the United Kingdom, Australia, France, Italy, Mexico and New Zealand for tax years 2006 to the present.

XML



Business Segment Information

3 Months Ended

May 27, 2011

Business Segment Information [Abstract]

Business Segment Information

Note 14 — Business Segment Information

The Corporation has North American Social Expression Products, International Social Expression Products, AG Interactive and non-reportable segments. The North American Social Expression Products and International Social Expression Products segments primarily design, manufacture and sell greeting cards and other related products through various channels of distribution with mass merchandise retailers as the primary channel. AG Interactive distributes social expression products, including electronic greetings, personalized printable greeting cards and a broad range of graphics and digital services and products, through a variety of electronic channels, including Web sites, Internet portals, instant messaging services and electronic mobile devices. The Corporation’s non-reportable operating segments primarily include licensing activities and the design, manufacture and sale of display fixtures.

During the current quarter, certain items that were previously considered corporate expenses are now included in the calculation of segment earnings for the North American Social Expression Products segment. This change is the result of modifications to organizational structures, and is intended to better align the segment financial results with the responsibilities of segment management and the way management evaluates the Company’s operations. In addition, segment results are now reported using actual foreign exchange rates for the periods presented. Previously, segment results were reported at constant exchange rates to eliminate the impact of foreign currency fluctuations. Prior year segment results have been presented to be consistent with the current methodologies.

	Total Revenue				Segment Earnings (Loss)
	Three Months Ended				Three Months Ended
(In thousands)	May 27, 2011		May 28, 2010		May 27, 2011			May 28, 2010
North American Social Expression Products	$	303,228	$	308,309	$	59,618		$	64,063
International Social Expression Products		70,205		57,573		3,303			2,834
AG Interactive		16,717		18,554		2,312			2,372
Non-reportable segments		12,199		11,872		4,606			2,152
Unallocated		—		—		(19,049	)		(20,404	)
	$	402,349	$	396,308	$	50,790		$	51,017

For the three months ended May 27, 2011, “Unallocated” includes interest expense for centrally incurred debt, domestic profit-sharing expense and stock-based compensation expense of $6.1 million, $3.7 million and $2.7 million, respectively. For the three months ended May 28, 2010, these amounts totaled $6.2 million, $3.5 million and $2.6 million, respectively. “Unallocated” also includes costs associated with corporate operations including senior management, corporate finance, legal and insurance programs. These costs totaled $6.5 million and $8.1 million for the three months ended May 27, 2011 and May 28, 2010, respectively.

Termination Benefits

Termination benefits are primarily considered part of an ongoing benefit arrangement, accounted for in accordance with ASC Topic 712, “Compensation — Nonretirement Postemployment Benefits,” and are recorded when payment of the benefits is probable and can be reasonably estimated.

The balance of the severance accrual was $5.8 million, $8.0 million and $11.6 million at May 27, 2011, February 28, 2011 and May 28, 2010, respectively. The payments expected within the next twelve months are included in “Accrued liabilities” while the remaining payments beyond the next twelve months are included in “Other liabilities” on the Consolidated Statement of Financial Position.

Expenses associated with Royalty Revenue

The Corporation has agreements for licensing the Care Bears and Strawberry Shortcake characters and other intellectual property. These license agreements provide for royalty revenue to the Corporation, which is recorded in “Other revenue.” These license agreements may include the receipt of upfront advances, which are recorded as deferred revenue and earned during the period of the agreement. Expenses associated with the servicing of these agreements, primarily relating to the licensing activities included in non-reportable segments, are summarized as follows:

	Three Months Ended
(In thousands)	May 27, 2011		May 28, 2010
Material, labor and other production costs	$	2,426	$	2,065
Selling, distribution and marketing expenses		1,345		1,429
Administrative and general expenses		389		433
	$	4,160	$	3,927

Deferred Revenue

Deferred revenue, included in “Other current liabilities” and “Other liabilities” on the Consolidated Statement of Financial Position, totaled $38.0 million, $39.4 million and $39.1 million at May 27, 2011, February 28, 2011 and May 28, 2010, respectively. The amounts relate primarily to subscription revenue in the Corporation’s AG Interactive segment and the licensing activities included in non-reportable segments.

Acquisitions

Continuing the strategy of focusing on growing its core greeting card business, on March 1, 2011, the Corporation’s European subsidiary, UK Greetings Ltd., acquired Watermark Publishing Limited and its wholly owned subsidiary Watermark Packaging Limited (“Watermark”). Watermark is a privately held company located in Corby, England, and is considered a leader in the United Kingdom in the innovation and design of greeting cards. Under the terms of the transaction, the Corporation acquired 100% of the equity interests of Watermark for approximately $17.1 million in cash. Cash paid for Watermark, net of cash acquired was approximately $6.0 million and is reflected in investing activities in the Consolidated Statement of Cash Flows.

The total cost of the acquisition has been allocated to the assets acquired and the liabilities assumed based upon their estimated fair values at the date of the acquisition. The estimated purchase price allocation is preliminary and subject to revision as valuation work is still being conducted. The following represents the preliminary purchase price allocation:

Purchase price (in millions):
Cash paid	$	17.1
Cash acquired		(11.1	)
	$	6.0
Allocation (in millions):
Current assets	$	8.7
Property, plant and equipment		0.4
Intangible assets		2.7
Goodwill		1.4
Liabilities assumed		(7.2	)
	$	6.0

The financial results of this acquisition are included in the Corporation’s consolidated results from the date of acquisition. Pro forma results of operations have not been presented because the effect of this acquisition was not deemed material. The Watermark business is included in the Corporation’s International Social Expression Products segment.

XML



Subsequent Event

3 Months Ended

May 27, 2011

Subsequent Event [Abstract]

Subsequent Event

Note 15 — Subsequent Event

On June 9, 2011, the Corporation sold certain minor character properties in exchange for cash proceeds of $4.5 million. As a result, the Corporation expects to record a gain of approximately $4.5 million during the second quarter ending August 26, 2011.

XML



Consolidated Statement of Income (Unaudited) (USD $) In Thousands, except Share data	3 Months Ended
	May 27, 2011	May 28, 2010
Consolidated Statement of Income [Abstract]
Net sales	$ 396,776	$ 392,105
Other revenue	5,573	4,203
Total revenue	402,349	396,308
Material, labor and other production costs	157,929	158,013
Selling, distribution and marketing expenses	123,292	117,551
Administrative and general expenses	65,298	66,032
Other operating income - net	(923)	(594)
Operating income	56,753	55,306
Interest expense	6,124	6,202
Interest income	(321)	(213)
Other non-operating expense (income) - net	160	(1,700)
Income before income tax expense	50,790	51,017
Income tax expense	18,197	20,178
Net income	$ 32,593	$ 30,839
Earnings per share - basic	$ 0.80	$ 0.78
Earnings per share - assuming dilution	$ 0.78	$ 0.75
Average number of shares outstanding	40,500,357	39,638,568
Average number of shares outstanding - assuming dilution	41,799,366	40,849,429
Dividends declared per share	$ 0.15	$ 0.14

XML



Consolidated Statement of Financial Position (USD $) In Thousands	May 27, 2011	Feb. 28, 2011	May 28, 2010
Current assets
Cash and cash equivalents	$ 211,139	$ 215,838	$ 186,775
Trade accounts receivable, net	137,213	119,779	110,085
Inventories	203,346	179,730	157,913
Deferred and refundable income taxes	46,686	50,051	74,951
Assets held for sale	7,180	7,154	14,680
Prepaid expenses and other	117,315	128,372	118,046
Total current assets	722,879	700,924	662,450
Goodwill	29,701	28,903	30,238
Other assets	431,472	436,137	413,237
Deferred and refundable income taxes	127,731	124,789	150,207
Property, plant and equipment - at cost	859,189	849,552	835,707
Less accumulated depreciation	616,706	607,903	597,610
Property, plant and equipment - net	242,483	241,649	238,097
Total Assets	1,554,266	1,532,402	1,494,229
Current liabilities
Debt due within one year	0	0	99,000
Accounts payable	98,641	87,105	80,205
Accrued liabilities	65,527	59,841	61,425
Accrued compensation and benefits	35,163	72,379	35,472
Income taxes payable	18,752	10,951	25,390
Other current liabilities	100,107	102,286	91,878
Total current liabilities	318,190	332,562	393,370
Long-term debt	233,298	232,688	230,973
Other liabilities	186,484	186,505	179,643
Deferred income taxes and noncurrent income taxes payable	32,132	31,736	30,548
Shareholder's equity
Capital in excess of par value	502,131	492,048	478,676
Treasury stock	(951,643)	(952,206)	(951,830)
Accumulated other comprehensive income (loss)	2,121	(2,346)	(40,257)
Retained earnings	1,190,808	1,171,008	1,133,116
Total shareholders' equity	784,162	748,911	659,695
Total Liabilities and Stockholders' Equity	1,554,266	1,532,402	1,494,229
Class A
Shareholder's equity
Common shares	37,942	37,470	37,064
Class B
Shareholder's equity
Common shares	$ 2,803	$ 2,937	$ 2,926

XML



Consolidated Statement of Cash Flows (Unaudited) (USD $) In Thousands	3 Months Ended
	May 27, 2011	May 28, 2010
OPERATING ACTIVITIES:
Net income	$ 32,593	$ 30,839
Adjustments to reconcile net income to cash flows from operating activities:
Stock-based compensation	2,662	2,650
Net loss (gain) on disposal of fixed assets	86	(151)
Depreciation and amortization	9,929	10,294
Deferred income taxes	1,147	(535)
Other non-cash charges	872	735
Changes in operating assets and liabilities, net of acquisitions:
Trade accounts receivable	(12,389)	19,576
Inventories	(18,750)	4,483
Other current assets	2,442	(2,878)
Income taxes	7,596	15,830
Deferred costs - net	13,099	13,802
Accounts payable and other liabilities	(27,922)	(66,362)
Other - net	597	4,256
Total Cash Flows From Operating Activities	11,962	32,539
INVESTING ACTIVITIES:
Property, plant and equipment additions	(8,891)	(5,965)
Cash payments for business acquisitions, net of cash acquired	(5,992)
Proceeds from sale of fixed assets	24	555
Proceeds from escrow related to party goods transaction		24,523
Total Cash Flows From Investing Activities	(14,859)	19,113
FINANCING ACTIVITIES:
Net decrease in long-term debt		(250)
Sale of stock under benefit plans	12,000	19,087
Purchase of treasury shares	(9,942)	(12,979)
Dividends to shareholders	(6,062)	(5,525)
Total Cash Flows From Financing Activities	(4,004)	333
EFFECT OF EXCHANGE RATE CHANGES ON CASH	2,202	(3,159)
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	(4,699)	48,826
Cash and Cash Equivalents at Beginning of Year	215,838	137,949
Cash and Cash Equivalents at End of Period	$ 211,139	$ 186,775

XML



Basis of Presentation

3 Months Ended

May 27, 2011

Basis of Presentation [Abstract]

Basis of Presentation

Note 1 — Basis of Presentation

The accompanying unaudited consolidated financial statements of American Greetings Corporation and its subsidiaries (the “Corporation”) have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary to fairly present financial position, results of operations and cash flows for the periods have been included.

The Corporation’s fiscal year ends on February 28 or 29. References to a particular year refer to the fiscal year ending in February of that year. For example, 2011 refers to the year ended February 28, 2011.

These interim financial statements should be read in conjunction with the Corporation’s financial statements and notes thereto included in its Annual Report on Form 10-K for the year ended February 28, 2011, from which the Consolidated Statement of Financial Position at February 28, 2011, presented herein, has been derived. Certain amounts in the prior year financial statements have been reclassified to conform to the 2012 presentation. These reclassifications had no material impact on financial position, earnings or cash flows.

The Corporation’s investments in less than majority-owned companies in which it has the ability to exercise significant influence over the operation and financial policies are accounted for using the equity method except when they qualify as variable interest entities (“VIE”) and the Corporation is the primary beneficiary, in which case, the investments are consolidated. Investments that do not meet the above criteria are accounted for under the cost method.

The Corporation holds an approximately 15% equity interest in Schurman Fine Papers (“Schurman”), which is a VIE as defined in Accounting Standards Codification (“ASC”) topic 810, (“ASC 810”) “Consolidation.” Schurman owns and operates approximately 430 specialty card and gift retail stores in the United States and Canada. The stores are primarily located in malls and strip shopping centers. During the current period, the Corporation assessed the variable interests in Schurman and determined that a third party holder of variable interests has the controlling financial interest in the VIE and thus, the third party, not the Corporation, is the primary beneficiary. In completing this assessment, the Corporation identified the activities that it considers most significant to the future economic success of the VIE and determined that it does not have the power to direct those activities. As such, Schurman is not consolidated in the Corporation’s results. The Corporation’s maximum exposure to loss as it relates to Schurman as of May 27, 2011 includes:

• the investment in the equity of Schurman of $1.9 million;

• the Liquidity Guaranty of Schurman’s indebtedness of $12 million;

• normal course of business trade accounts receivable due from Schurman of $12.3 million, the balance of which fluctuates throughout the year due to the seasonal nature of the business;

• the operating leases currently subleased to Schurman, the aggregate lease payments for the remaining life of which was $32.0 million, $36.0 million and $46.3 million as of May 27, 2011, February 28, 2011 and May 28, 2010, respectively;

• the subordinated credit facility (the “Subordinated Credit Facility”) that provides Schurman with up to $10 million of subordinated financing.

The Corporation provides Schurman limited credit support through the provision of a Liquidity Guaranty in favor of the lenders under Schurman’s senior revolving credit facility (the “Senior Credit Facility”). Pursuant to the terms of the Liquidity Guaranty, the Corporation has guaranteed the repayment of up to $12 million of Schurman’s borrowings under the Senior Credit Facility to help ensure that Schurman has sufficient borrowing availability under this facility. The Liquidity Guaranty is required to be backed by a letter of credit for the term of the Liquidity Guaranty, which is currently anticipated to end in January 2014. The Corporation’s obligations under the Liquidity Guaranty generally may not be triggered unless Schurman’s lenders under its Senior Credit Facility have substantially completed the liquidation of the collateral under Schurman’s Senior Credit Facility, or 91 days after the liquidation is started, whichever is earlier, and will be limited to the deficiency, if any, between the amount owed and the amount collected in connection with the liquidation. There was no triggering event or liquidation of collateral as of May 27, 2011 requiring the use of the guaranty.

The Subordinated Credit Facility that the Corporation provides to Schurman has an initial term of nineteen months, subject to up to three automatic one-year renewal periods (or partial-year, in the case of the last renewal), unless either party provides the appropriate written notice prior to the expiration of the applicable term. Schurman can only borrow under the facility if it does not have other sources of financing available, and borrowings under the Subordinated Credit Facility may only be used for specified purposes. Borrowings under the Subordinated Credit Facility are subordinate to borrowings under the Senior Credit Facility, and the Subordinated Credit Facility includes affirmative and negative non-financial covenants and events of default customary for such financings. As of May 27, 2011, Schurman had not borrowed under the Subordinated Credit Facility.

The April 2009 transaction with Schurman also included a $12 million limited Bridge Guaranty in favor of the lenders under the Senior Credit Facility, which remained in effect until Schurman was able to include inventory and other assets of the retail stores it acquired from the Corporation in its borrowing base. As previously disclosed in the Corporation’s Annual Report on Form 10-K for the year ended February 28, 2011, on April 1, 2011, the Bridge Guaranty was terminated.

In addition to the investment in the equity of Schurman, as previously disclosed in the Corporation’s Annual Report on Form 10-K for the year ended February 28, 2011, the Corporation holds an investment in the common stock of AAH Holdings Corporation, Amscan’s ultimate parent Corporation. These two investments, totaling approximately $12.5 million, are accounted for under the cost method. The Corporation is not aware of any events or changes in circumstances that had occurred during the first quarter of 2012 that the Corporation believes are reasonably likely to have had a significant adverse effect on the carrying amount of these investments.

XML



Seasonal Nature of Business

3 Months Ended

May 27, 2011

Seasonal Nature of Business [Abstract]

Seasonal Nature of Business

Note 2 — Seasonal Nature of Business

A significant portion of the Corporation’s business is seasonal in nature. Therefore, the results of operations for interim periods are not necessarily indicative of the results for the fiscal year taken as a whole.

XML



Recent Accounting Pronouncements

3 Months Ended

May 27, 2011

Recent Accounting Pronouncements [Abstract]

Recent Accounting Pronouncements

Note 3 — Recent Accounting Pronouncements

In January 2010, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2010-06 (“ASU 2010-06”), “Improving Disclosures about Fair Value Measurements.” ASU 2010-06 provides amendments to ASC Topic 820, “Fair Value Measurements and Disclosures,” that require separate disclosure of significant transfers in and out of Level 1 and Level 2 fair value measurements in addition to the presentation of purchases, sales, issuances, and settlements for Level 3 fair value measurements. ASU 2010-06 also provides amendments to subtopic 820-10 that clarify existing disclosures about the level of disaggregation, and inputs and valuation techniques. The new disclosure requirements are effective for interim and annual periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements of Level 3 fair value measurements, which become effective for interim and annual periods beginning after December 15, 2010. The Corporation’s adoption of this standard did not have a material effect on its financial statements.

In May 2011, the FASB issued ASU No. 2011-04 (“ASU 2011-04”), “Fair Value Measurement: Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.” ASU 2011-04 improves comparability of fair value measurements presented and disclosed in financial statements prepared with U.S. generally accepted accounting principles and International Financial Reporting Standards. ASU 2011-04 clarifies the application of existing fair value measurement requirements including (1) the application of the highest and best use and valuation premise concepts, (2) measuring the fair value of an instrument classified in a reporting entity’s shareholders’ equity, and (3) quantitative information required for fair value measurements categorized within Level 3. ASU 2011-04 also provides guidance on measuring the fair value of financial instruments managed within a portfolio, and application of premiums and discounts in a fair value measurement. In addition, ASU 2011-04 requires additional disclosure for Level 3 measurements regarding the sensitivity of fair value to changes in unobservable inputs and any interrelationships between those inputs. The amendments in this guidance are to be applied prospectively, and are effective for interim and annual periods beginning after December 15, 2011. The Corporation does not expect that the adoption of this standard will have a material effect on its financial statements.

XML



Other Income and Expense

3 Months Ended

May 27, 2011

Other Income and Expense [Abstract]

Other Income and Expense

Note 4 — Other Income and Expense

	Three Months Ended
(In thousands)	May 27, 2011			May 28, 2010
Foreign exchange loss (gain)	$	717		$	(1,053	)
Rental income		(471	)		(526	)
Loss (gain) on asset disposal		86			(151	)
Miscellaneous		(172	)		30
Other non-operating expense (income) — net	$	160		$	(1,700	)

“Miscellaneous” includes, among other things, income/loss from equity securities.

XML



Earnings Per Share

3 Months Ended

May 27, 2011

Earnings Per Share [Abstract]

Earnings Per Share

Note 5 — Earnings Per Share

The following table sets forth the computation of earnings per share and earnings per share - assuming dilution:

	Three Months Ended
	May 27, 2011		May 28, 2010
Numerator (in thousands):
Net income	$	32,593	$	30,839
Denominator (in thousands):
Weighted average shares outstanding		40,500		39,639
Effect of dilutive securities:
Stock options and awards		1,299		1,210
Weighted average shares outstanding — assuming dilution		41,799		40,849
Earnings per share	$	0.80	$	0.78
Earnings per share — assuming dilution	$	0.78	$	0.75

Approximately 2.2 million and 3.2 million stock options outstanding for the three month periods ended May 27, 2011 and May 28, 2010, respectively, were excluded from the computation of earnings per share—assuming dilution because the options’ exercise prices were greater than the average market price of the common shares during the respective periods.

The Corporation issued 0.5 million and 0.3 million Class A common shares and Class B treasury shares, respectively, upon exercise of employee stock options and vesting of equity awards during the three months ended May 27, 2011. The Corporation issued 0.8 million and 0.2 million Class A common shares and Class B treasury shares, respectively, upon exercise of employee stock options and vesting of equity awards during the three months ended May 28, 2010.