Business Segment Information

12 Months Ended

Feb. 28, 2011

Business Segment Information [Abstract]

BUSINESS SEGMENT INFORMATION

NOTE 16 – BUSINESS SEGMENT INFORMATION

The Corporation is organized and managed according to a number of factors, including product categories, geographic locations and channels of distribution.

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. As permitted under ASC Topic 280, “Segment Reporting,” certain operating divisions have been aggregated into both the North American Social Expression Products and International Social Expression Products segments. The aggregated operating divisions have similar economic characteristics, products, production processes, types of customers and distribution methods. Approximately 54%, 51% and 54% of the North American Social Expression Products segment’s revenue in 2011, 2010 and 2009, respectively, is attributable to its top five customers. Approximately 44%, 45% and 39% of the International Social Expression Products segment’s revenue in 2011, 2010 and 2009, respectively, is attributable to its top three customers.

At February 28, 2009, the Corporation owned and operated 341 card and gift retail stores in the United States and Canada through its Retail Operations segment. The stores were primarily located in malls and strip shopping centers. The stores sold products purchased from the North American Social Expression Products segment as well as products purchased from other vendors. During the first quarter of 2010, the Corporation sold all of its card and gift retail store assets to Schurman, which operates stores under the American Greetings, Carlton Cards and Papyrus brands. See Note 2 for further information.

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.

The Corporation’s senior management evaluates segment performance based on earnings before foreign currency exchange gains or losses, interest income, interest expense, centrally-managed costs and income taxes. The accounting policies of the reportable segments are the same as those described in Note 1 – Significant Accounting Policies, except those that are related to LIFO or applicable to only corporate items.

Prior to the sale of the Retail Operations segment, intersegment sales from the North American Social Expression Products segment to the Retail Operations segment were recorded at estimated arm’s-length prices. Intersegment sales and profits were eliminated in consolidation. All inventories resulting from intersegment sales were carried at cost. Accordingly, the Retail Operations segment recorded full profit upon its sales to consumers.

The reporting and evaluation of segment assets include net accounts receivable, inventory on a FIFO basis, display materials and factory supplies, prepaid expenses, other assets and net property, plant and equipment. Unallocated and intersegment items include primarily cash, taxes and LIFO.

Segment results are internally reported and evaluated at consistent exchange rates between years to eliminate the impact of foreign currency fluctuations. An exchange rate adjustment is included in the reconciliation of the segment results to the consolidated results; this adjustment represents the impact on the segment results of the difference between the exchange rates used for segment reporting and evaluation and the actual exchange rates for the periods presented.

Centrally incurred and managed costs are not allocated back to the operating segments. The unallocated items include interest expense on centrally-incurred debt, domestic profit-sharing expense, settlement charges and stock-based compensation expense. In addition, the costs associated with corporate operations including the senior management, corporate finance, legal and human resource functions, among other costs, are included in the unallocated items. In 2010, unallocated items included the negotiated settlement of a lawsuit totaling $24,000, all of which was paid as of February 28, 2010.

Operating Segment Information

	Total Revenue									Segment Earnings (Loss)
	2011			2010			2009			2011			2010			2009
North American Social Expression Products	$	1,173,599		$	1,231,624		$	1,139,203		$	210,154		$	236,125		$	106,311
Intersegment items		–			(5,104	)		(52,805	)		–			(3,511	)		(38,899	)
Exchange rate adjustment		17,884			8,659			9,050			8,170			3,800			2,539
Net		1,191,483			1,235,179			1,095,448			218,324			236,414			69,951
International Social Expression Products		256,507			250,026			245,331			19,536			16,693			(68,545	)
Exchange rate adjustment		5,205			4,006			25,396			36			153			(9,124	)
Net		261,712			254,032			270,727			19,572			16,846			(77,669	)
Retail Operations		–			11,727			170,066			–			(34,830	)		(19,727	)
Exchange rate adjustment		–			112			8,746			–			(285	)		496
Net		–			11,839			178,812			–			(35,115	)		(19,231	)
AG Interactive		78,407			80,320			82,623			14,103			11,319			(159,670	)
Exchange rate adjustment		(201	)		126			790			(112	)		100			(2,021	)
Net		78,206			80,446			83,413			13,991			11,419			(161,691	)
Non-reportable segments		61,167			53,975			62,338			9,477			7,634			(7,627	)
Unallocated		–			387			–			(106,259	)		(116,476	)		(80,193	)
Exchange rate adjustment		–			–			–			902			232			1,527
Net		–			387			–			(105,357	)		(116,244	)		(78,666	)
	$	1,592,568		$	1,635,858		$	1,690,738		$	156,007		$	120,954		$	(274,933	)

	Depreciation and Amortization							Capital Expenditures
	2011			2010		2009		2011		2010			2009
North American Social Expression Products	$	30,045		$	32,504	$	28,174	$	28,880	$	22,144		$	43,460
Exchange rate adjustment		20			11		22		–		8			52
Net		30,065			32,515		28,196		28,880		22,152			43,512
International Social Expression Products		4,409			4,585		5,120		3,495		1,273			1,226
Exchange rate adjustment		22			74		578		7		20			107
Net		4,431			4,659		5,698		3,502		1,293			1,333
Retail Operations		–			395		4,653		–		29			4,330
Exchange rate adjustment		–			18		268		–		(2	)		228
Net		–			413		4,921		–		27			4,558
AG Interactive		4,150			5,105		8,633		2,762		2,610			3,916
Exchange rate adjustment		(7	)		17		330		–		1			2
Net		4,143			5,122		8,963		2,762		2,611			3,918
Non-reportable segments		1,701			1,820		1,628		1,130		260			2,218
Unallocated		708			636		610		72		207			194
	$	41,048		$	45,165	$	50,016	$	36,346	$	26,550		$	55,733

	Assets
	2011		2010
	(Restated)
North American Social Expression Products	$	956,169	$	961,057
Exchange rate adjustment		4,876		2,273
Net		961,045		963,330
International Social Expression Products		117,928		136,551
Exchange rate adjustment		6,934		(1,539	)
Net		124,862		135,012
Retail Operations		2,080		1,738
Exchange rate adjustment		-		-
Net		2,080		1,738
AG Interactive		17,983		20,352
Exchange rate adjustment		56		(77	)
Net		18,039		20,275
Non-reportable segments		39,204		39,026
Unallocated and intersegment items		386,818		378,200
Exchange rate adjustment		15,201		6,917
Net		402,019		385,117
	$	1,547,249	$	1,544,498

Geographical Information

	Total Revenue						Fixed Assets - Net
	2011		2010		2009		2011		2010
United States	$	1,205,915	$	1,266,876	$	1,235,828	$	218,354	$	220,626
United Kingdom		216,309		209,059		222,918		21,099		20,041
Other international		170,344		159,923		231,992		2,196		2,216
	$	1,592,568	$	1,635,858	$	1,690,738	$	241,649	$	242,883

Product Information

	Total Revenue
	2011		2010		2009
Everyday greeting cards	$	753,027	$	764,199	$	704,380
Seasonal greeting cards		377,282		368,781		356,762
Gift packaging		222,541		221,167		240,452
Other revenue		32,355		37,566		44,339
All other products		207,363		244,145		344,805
	$	1,592,568	$	1,635,858	$	1,690,738

The “All other products” classification includes, among other things, giftware, party goods, calendars, custom display fixtures, stickers, online greeting cards and other digital products.

Termination Benefits and Facility Closings

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 Corporation recorded severance charges of $6,944, $10,814 and $15,688 in 2011, 2010 and 2009, respectively, related to headcount reductions and facility closures at several locations. During 2010, severance charges totaling $1,397 and $2,798 were recorded in the North American Social Expression Products segment related to the planned facility closures in Mexico City, Mexico and Kalamazoo, Michigan, respectively. See Note 2 for further information. The expense of $15,688 recorded in 2009 included enhanced benefits provided to certain domestic employees that were severed in connection with the headcount reductions announced in the fourth quarter of 2009. These one-time termination benefits were accounted for in accordance with ASC Topic 420, “Exit or Disposal Cost Obligations.”

The following table summarizes the severance charges by segment:

	2011		2010		2009
North American Social Expression Products	$	4,737	$	8,517	$	6,247
International Social Expression Products		773		263		4,119
Retail Operations		-		618		1,787
AG Interactive		900		802		1,626
Non-reportable		37		232		1,108
Unallocated		497		382		801
Total	$	6,944	$	10,814	$	15,688

The remaining balance of the severance accrual was $8,002 and $14,030 at February 28, 2011 and 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.