8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (date of earliest event reported): December 19, 2008

American Greetings Corporation

(Exact Name of Registrant as Specified in its Charter)

Ohio	1-13859	34-0065325
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)
One American Road Cleveland, Ohio		44144
(Address of principal executive offices)		(Zip Code)

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

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition.

On December 23, 2008, (“American Greetings” or the “Company”) issued a press release reporting its results for the quarter ended November 28, 2008. A copy of this press release is attached hereto as Exhibit 99.1.

The information in this Item 2.02 of this Current Report on Form 8-K (including the exhibit attached hereto) is being furnished under Item 2.02 and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of such section, or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 2.06 Material Impairments.

In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 142 (“SFAS 142”), “Goodwill and Other Intangible Assets,” American Greetings is required to evaluate the carrying value of its goodwill for potential impairment on an annual basis or an interim basis if there are indicators of potential impairment.

Due to the recent deterioration in the global economic environment and resulting significant decrease in American Greetings’ market capitalization, combined with significant decreases in reported market values of comparable, unrelated companies, indicators emerged within the AG Interactive segment and one reporting unit located in the United Kingdom within the International Social Expression Products segment (the “UK Reporting Unit”) that led American Greetings to conclude that a SFAS 142 impairment test was required to be performed during the third quarter for goodwill in these reporting units. Within the AG Interactive segment, there were the following three primary indicators:

1. A substantial decline in advertising revenues;

2. The e-commerce businesses not growing as anticipated; and

3. The Company’s belief that the segment’s current long-term cash flow forecasts may now be unattainable based on the lengthening and deepening economic deterioration.

The following three primary indicators emerged within the UK Reporting Unit:

1. The recent bankruptcy of a major customer;

2. A major customer implementing buying freezes across product lines, including on American Greetings everyday products; and

3. The Company’s belief that the unit’s current long-term cash flow forecasts may now be unattainable based on the lengthening and deepening economic deterioration.

While these events individually may not indicate the need for impairment testing, in connection with the preparation of its financial statements for the third quarter, American Greetings concluded that considering the combination of these events, testing was required. Based on the foregoing, on December 19, 2008, American Greetings concluded that the goodwill and certain of the other intangible assets of the AG Interactive segment and the UK Reporting Unit were materially impaired and on December 23, 2008, announced that non-cash, pre-tax goodwill and other intangible asset impairment charges of $242.9 million are expected. American Greetings estimates, based on its preliminary analysis, the goodwill impairment charge for its UK Reporting Unit will be $82.1 million, which represents the majority of the goodwill for this reporting unit. The goodwill and intangible asset impairment charges for its AG Interactive segment are estimated to be $160.8 million, which includes all of the goodwill for AG Interactive. The impairment charges, which do not result in current or future cash expenditures, were recorded in accordance with SFAS 142, with respect to goodwill, and SFAS No. 144 (“SFAS 144”), “Accounting for the Impairment or Disposal of Long-Lived Assets,” with respect to intangible assets, in American Greetings’ third quarter financial results. The actual amount of the goodwill impairment charges will not be finalized until American Greetings has completed its impairment testing.

As a result of weak performance in certain Carlton retail stores, the Company also reviewed its long-lived assets within the Retail Operations segment. As a result of that review and reductions in future cash flow forecasts, the Company recorded a non-cash pre-tax long-lived asset impairment charge of $3.9 million. This impairment charge, which does not result in current or future cash expenditures, was recorded in accordance with SFAS 144 in American Greetings’ third quarter financial results.

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FORWARD-LOOKING STATEMENTS

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 the Company’s operations and business environment, which are difficult to predict and may be beyond the control of the Company. Important factors that could cause actual results to differ materially from those suggested by these forward-looking statements, and that could adversely affect the Company’s future financial performance, include, but are not limited to, the following:

• the completion and final results of the Company’s goodwill impairment analysis;

• a weak retail environment and general economic conditions;

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

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

• competitive terms of sale offered to customers;

• if the Company determines additional retail store closures are necessary;

• 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;

• consumer acceptance of products as priced and marketed;

• the ability to successfully integrate acquisitions;

• the impact of technology on core product sales;

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

• escalation in the cost of providing employee health care;

• the ability to identify, complete, or achieve the desired benefits associated with productivity improvement projects;

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

• whether the Company executes share repurchase programs or the ability to achieve the desired accretive effect from any such share repurchases;

• whether the Company will be repaid our recent investment in its first-lien distressed debt securities of another social expressions company;

• the Company’s ability to comply with its debt covenants;

• the Company’s ability to successfully complete, or achieve the desired benefits associated with, dispositions, including the sale of the Strawberry Shortcake and Care Bears properties;

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

• the outcome of any legal claims known or unknown.

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Risks pertaining specifically to AG Interactive include the viability of online advertising, subscriptions as revenue generators, the public’s acceptance of online greetings and other social expression products, and the ability to gain a leadership position in the digital photo sharing space.

In addition, this report contains time-sensitive information that reflects management’s best analysis as of the date of this report. American Greetings does not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events, information or circumstances that arise after the date of this report. Further information concerning issues that could materially affect financial performance related to forward-looking statements can be found in the Company’s periodic filings with the Securities and Exchange Commission, including the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the fiscal year ended February 29, 2008.

Item 9.01 Financial Statements and Exhibits.

d) Exhibits.

Exhibit	Description
Exhibit 99.1	Press Release – Reporting results for the quarter ended November 28, 2008.

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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
(Registrant)
By:	/s/    Joseph B. Cipollone
	Joseph B. Cipollone, Vice President,
	Corporate Controller and
	Chief Accounting Officer

Date: December 23, 2008

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EX-99.1

Exhibit 99.1

AMERICAN GREETINGS ANNOUNCES THIRD QUARTER RESULTS

CLEVELAND (December 23, 2008) – American Greetings Corporation (NYSE: AM) today announced its third quarter results for the fiscal quarter ended November 28, 2008.

Third Quarter Results

For the third quarter of fiscal 2009, the Company reported total revenue of $454.1 million, a pre-tax loss from continuing operations of $228.7 million, and a loss from continuing operations of $193.3 million or $4.25 per share (all per-share amounts assume dilution). For the third quarter of fiscal 2008, the Company reported total revenue of $485.8 million, pre-tax income from continuing operations of $44.1 million, and income from continuing operations of $29.1 million or 52 cents per share.

On December 9, 2008, the Company announced that as a result of the recent deterioration in the global economic environment, indicators arose during the third quarter requiring the Company to accelerate the process of reviewing its goodwill and other long-lived assets for impairment. As a result of this accelerated review, the Company recorded, within the International Social Expression Products and AG Interactive segments, estimated non-cash pre-tax goodwill and other asset impairment charges of $242.9 million (after-tax of approximately $202.6 million) that reduced earnings per share by $4.46 during the quarter.

The Company also reviewed its long-lived assets within the Retail Operations segment. As a result of that review, the Company recorded a non-cash pre-tax long-lived asset impairment charge of $3.9 million (after-tax of approximately $2.7 million) that reduced earnings per share by 6 cents during the quarter.

The Company also announced on December 9, 2008, the elimination of approximately 275 positions as part of a cost reduction effort. As a result of those position eliminations, the Company recognized a pre-tax severance charge of $7.0 million (after-tax of approximately $4.7 million) that reduced earnings per share by 10 cents. Partially offsetting these charges was a reduction of variable compensation expense of $11.1 million (after-tax of approximately $7.5 million), which increased the Company’s earnings per share by 17 cents.

Chief Executive Officer Zev Weiss said, “The rapidly deteriorating economy has significantly impacted our business in the third fiscal quarter. We are currently focused on taking additional steps to reduce our cost structure in order to position our business during this difficult economic period.”

Outlook

As a result of the rapid changes in the economy and the uncertainty of the impact those changes will have on the business, the potential for additional retail store closures, and the finalization of the goodwill impairment tests, the Company is currently unable to provide definitive earnings guidance for the balance of this fiscal year.

Financing Activities

During the third quarter, the Company purchased approximately 300,000 shares of its common stock for $5.0 million completing the Company’s $100 million share repurchase program announced in January 2008. The Company has reduced its diluted share count by approximately 45 percent over the past four years.

Conference Call on the Web

American Greetings will broadcast its conference call live on the Internet at 9:00 a.m. Eastern time today. The conference call will be accessible through the Investor Relations section of the American Greetings Web site at http://investors.americangreetings.com. A replay of the call will be available on the site.

About American Greetings Corporation

For more than 100 years, American Greetings Corporation (NYSE: AM - News) has been a manufacturer and retailer of innovative social expression products that assist consumers in enhancing their relationships. The Company’s major greeting card brands are American Greetings, Carlton Cards and Gibson, and other paper product offerings include DesignWare party goods, American Greetings and Plus Mark gift-wrap and boxed cards and Date Works calendars. American Greetings also has the largest collection of electronic greetings on the Web, including cards available at AmericanGreetings.com through AG Interactive, Inc., the Company’s online division. AG Interactive also offers digital photo sharing and personal publishing at PhotoWorks.com and Webshots.com and a one-stop source for online graphics, animations, and more at Kiwee.com. In addition to its product lines, American Greetings also creates and licenses popular character brands through the American Greetings Properties group. Headquartered in Cleveland, Ohio, American Greetings generates annual revenue of approximately $1.8 billion, and its products can be found in retail outlets domestically and worldwide, including Company-owned American Greetings and Carlton Cards stores. For more information on the Company, visit http://corporate.americangreetings.com.

###

CONTACT:

Gregory M. Steinberg

Treasurer and Director of Investor Relations

American Greetings Corporation

216-252-4864

investor.relations@amgreetings.com

Certain statements in this release 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 the Company’s operations and business environment, which are difficult to predict and may be beyond the control of the Company. Important factors that could cause actual results to differ materially from those suggested by these forward-looking statements, and that could adversely affect the Company’s future financial performance, include, but are not limited to, the following:

• a weak retail environment and general economic conditions;

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

2

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

• competitive terms of sale offered to customers;

• if the Company determines additional retail store closures are necessary;

• 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;

• consumer acceptance of products as priced and marketed;

• the ability to successfully integrate acquisitions;

• the impact of technology on core product sales;

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

• escalation in the cost of providing employee health care;

• the ability to identify, complete, or achieve the desired benefits associated with productivity improvement projects;

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

• whether the Company executes share repurchase programs or the ability to achieve the desired accretive effect from any such share repurchases;

• whether the Company will be repaid our recent investment in its first-lien distressed debt securities of another social expressions company;

• the Company’s ability to comply with its debt covenants;

• the Company’s ability to successfully complete, or achieve the desired benefits associated with, dispositions, including the sale of the Strawberry Shortcake and Care Bears properties;

• fluctuations in the value of currencies in major areas where the Company operates, 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, the public’s acceptance of online greetings and other social expression products, and the ability to gain a leadership position in the digital photo sharing space.

In addition, this release contains time-sensitive information that reflects management’s best analysis as of the date of this release. American Greetings does not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events, information or circumstances that arise after the date of this release. Further information concerning issues that could materially affect financial performance related to forward-looking statements can be found in the Company’s periodic filings with the Securities and Exchange Commission, including the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the fiscal year ended February 29, 2008.

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AMERICAN GREETINGS CORPORATION

THIRD QUARTER CONSOLIDATED STATEMENT OF OPERATIONS

FISCAL YEAR ENDING FEBRUARY 28, 2009

(In thousands of dollars except share and per share amounts)

	(Unaudited)
	Three Months Ended						Nine Months Ended
	November 28, 2008			November 23, 2007			November 28, 2008			November 23, 2007
Net sales	$	444,527		$	475,015		$	1,242,932		$	1,258,909
Other revenue		9,557			10,751			25,287			24,309
Total revenue		454,084			485,766			1,268,219			1,283,218
Material, labor and other production costs		223,214			223,329			586,668			547,509
Selling, distribution and marketing expenses		159,819			159,420			465,081			444,700
Administrative and general expenses		50,841			60,875			170,564			179,461
Goodwill and other intangible assets impairment		242,889			—			242,889			—
Other operating income - net		(491	)		(127	)		(1,329	)		(807	)
Operating (loss) income		(222,188	)		42,269			(195,654	)		112,355
Interest expense		6,634			4,835			16,973			14,431
Interest income		(947	)		(2,122	)		(2,835	)		(5,855	)
Other non-operating expense (income) - net		792			(4,582	)		(2,726	)		(7,478	)
(Loss) income from continuing operations before income tax (benefit) expense		(228,667	)		44,138			(207,066	)		111,257
Income tax (benefit) expense		(35,356	)		15,018			(29,385	)		43,499
(Loss) income from continuing operations		(193,311	)		29,120			(177,681	)		67,758
Loss from discontinued operations, net of tax		—			(104	)		—			(317	)
Net (loss) income	$	(193,311	)	$	29,016		$	(177,681	)	$	67,441
(Loss) earnings per share - basic:
(Loss) income from continuing operations	$	(4.25	)	$	0.53		$	(3.75	)	$	1.23
Loss from discontinued operations		—			—			—			(0.01	)
Net (loss) income	$	(4.25	)	$	0.53		$	(3.75	)	$	1.22
(Loss) earnings per share - assuming dilution:
(Loss) income from continuing operations	$	(4.25	)	$	0.52		$	(3.75	)	$	1.22
Loss from discontinued operations		—			—			—			(0.01	)
Net (loss) income	$	(4.25	)	$	0.52		$	(3.75	)	$	1.21
Average number of common shares outstanding		45,460,385			55,022,689			47,343,640			55,350,736
Average number of common shares outstanding - assuming dilution		45,460,385			55,466,351			47,343,640			55,726,990
Dividends declared per share	$	0.12		$	0.10		$	0.36		$	0.30

AMERICAN GREETINGS CORPORATION

THIRD QUARTER CONSOLIDATED STATEMENT OF FINANCIAL POSITION

FISCAL YEAR ENDING FEBRUARY 28, 2009

(In thousands of dollars)

	(Unaudited)
	November 28, 2008			November 23, 2007
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	55,604		$	71,117
Trade accounts receivable, net		163,463			205,709
Inventories		246,596			239,209
Deferred and refundable income taxes		62,490			76,568
Prepaid expenses and other		182,803			213,534
Total current assets		710,956			806,137
GOODWILL		56,965			267,308
OTHER ASSETS		408,677			391,460
DEFERRED AND REFUNDABLE INCOME TAXES		166,269			111,959
Property, plant and equipment - at cost		966,088			975,832
Less accumulated depreciation		671,180			684,213
PROPERTY, PLANT AND EQUIPMENT - NET		294,908			291,619
	$	1,637,775		$	1,868,483
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Debt due within one year	$	247,945		$	46,490
Accounts payable		135,002			131,190
Accrued liabilities		78,607			89,818
Accrued compensation and benefits		35,184			58,969
Income taxes payable		36,686			31,255
Other current liabilities		106,436			96,896
Total current liabilities		639,860			454,618
LONG-TERM DEBT		200,684			200,975
OTHER LIABILITIES		148,320			151,094
DEFERRED INCOME TAXES AND NONCURRENT INCOME TAXES PAYABLE		17,229			31,877
SHAREHOLDERS’ EQUITY
Common shares - Class A		41,917			49,929
Common shares - Class B		3,495			3,442
Capital in excess of par value		447,958			443,326
Treasury stock		(918,826	)		(780,044	)
Accumulated other comprehensive (loss) income		(48,334	)		22,982
Retained earnings		1,105,472			1,290,284
Total shareholders’ equity		631,682			1,029,919
	$	1,637,775		$	1,868,483

AMERICAN GREETINGS CORPORATION

THIRD QUARTER CONSOLIDATED STATEMENT OF CASH FLOWS

FISCAL YEAR ENDING FEBRUARY 28, 2009

(In thousands of dollars)

	(Unaudited) Nine Months Ended
	November 28, 2008			November 23, 2007
OPERATING ACTIVITIES:
Net (loss) income	$	(177,681	)	$	67,441
Loss from discontinued operations		—			317
(Loss) income from continuing operations		(177,681	)		67,758
Adjustments to reconcile (loss) income from continuing operations to cash flows from operating activities:
Goodwill and other intangible assets impairment		242,889			—
Net loss (gain) on disposal of fixed assets		642			(481	)
Depreciation and amortization		37,732			36,016
Deferred income taxes		(32,726	)		(7,994	)
Other non-cash charges		8,053			5,719
Changes in operating assets and liabilities, net of acquisitions and dispositions:
Trade accounts receivable		(115,268	)		(99,267	)
Inventories		(45,394	)		(49,911	)
Other current assets		10,486			18,199
Deferred costs - net		6,023			29,338
Accounts payable and other liabilities		(17,452	)		38,419
Other - net		(1,468	)		4,768
Total Cash Flows From Operating Activities		(84,164	)		42,564
INVESTING ACTIVITIES:
Proceeds from sale of short-term investments		—			692,985
Purchases of short-term investments		—			(692,985	)
Property, plant and equipment additions		(44,320	)		(37,394	)
Cash payments for business acquisitions, net of cash acquired		(15,625	)		(51,256	)
Cash receipts related to discontinued operations		—			4,283
Proceeds from sale of fixed assets		278			2,656
Other - net		(44,153	)		—
Total Cash Flows From Investing Activities		(103,820	)		(81,711	)
FINANCING ACTIVITIES:
Reduction of long-term debt		(22,509	)		—
Net increase in short-term debt		227,845			23,800
Sale of stock under benefit plans		494			26,198
Purchase of treasury shares		(51,190	)		(74,572	)
Dividends to shareholders		(17,116	)		(16,657	)
Total Cash Flows From Financing Activities		137,524			(41,231	)
DISCONTINUED OPERATIONS:
Operating cash flows from discontinued operations		—			(59	)
Total Cash Flows from Discontinued Operations		—			(59	)
EFFECT OF EXCHANGE RATE CHANGES ON CASH		(17,436	)		6,841
DECREASE IN CASH AND CASH EQUIVALENTS		(67,896	)		(73,596	)
Cash and Cash Equivalents at Beginning of Year		123,500			144,713
Cash and Cash Equivalents at End of Period	$	55,604		$	71,117

AMERICAN GREETINGS CORPORATION

THIRD QUARTER CONSOLIDATED SEGMENT DISCLOSURES

FISCAL YEAR ENDING FEBRUARY 28, 2009

(In thousands of dollars)

	(Unaudited)
	Three Months Ended						Nine Months Ended
	November 28, 2008			November 23, 2007			November 28, 2008			November 23, 2007
Total Revenue:
North American Social Expression Products	$	322,853		$	342,487		$	886,567		$	900,572
Intersegment items		(19,031	)		(20,337	)		(48,411	)		(43,422	)
Exchange rate adjustment		(2,661	)		942			(1,886	)		(1,846	)
Net		301,161			323,092			836,270			855,304
International Social Expression Products		89,365			86,951			222,429			215,439
Exchange rate adjustment		(10,797	)		2,259			(9,577	)		2,167
Net		78,568			89,210			212,852			217,606
Retail Operations		39,994			41,312			119,034			120,923
Exchange rate adjustment		(1,895	)		705			(1,288	)		(1,527	)
Net		38,099			42,017			117,746			119,396
AG Interactive		20,996			18,908			62,498			55,962
Exchange rate adjustment		(321	)		2			(290	)		1
Net		20,675			18,910			62,208			55,963
Non-reportable segments		15,581			12,507			39,143			34,834
Unallocated		—			30			—			115
	$	454,084		$	485,766		$	1,268,219		$	1,283,218
Segment Earnings (Loss):
North American Social Expression Products	$	48,496		$	66,022		$	136,555		$	196,868
Intersegment items		(13,721	)		(15,172	)		(35,714	)		(32,649	)
Exchange rate adjustment		(1,222	)		775			(1,177	)		(774	)
Net		33,553			51,625			99,664			163,445
International Social Expression Products		(80,478	)		10,904			(79,750	)		12,654
Exchange rate adjustment		4,883			250			4,802			280
Net		(75,595	)		11,154			(74,948	)		12,934
Retail Operations		(9,596	)		(5,814	)		(19,672	)		(15,144	)
Exchange rate adjustment		53			67			40			129
Net		(9,543	)		(5,747	)		(19,632	)		(15,015	)
AG Interactive		(160,907	)		2,222			(161,244	)		8,664
Exchange rate adjustment		93			(13	)		130			1
Net		(160,814	)		2,209			(161,114	)		8,665
Non-reportable segments		1,614			263			2,189			2,598
Unallocated		(16,926	)		(14,928	)		(52,117	)		(60,811	)
Exchange rate adjustment		(956	)		(438	)		(1,108	)		(559	)
Net		(17,882	)		(15,366	)		(53,225	)		(61,370	)
	$	(228,667	)	$	44,138		$	(207,066	)	$	111,257