Business Segment Information

12 Months Ended

Feb. 28, 2013

Business Segment Information

NOTE 17 – 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 merchandising as the primary channel. As permitted under ASC Topic 280, “Segment Reporting,” certain operating segments have been aggregated into the International Social Expression Products segment. The aggregated operating segments have similar economic characteristics, products, production processes, types of customers and distribution methods. Approximately 55%, 55% and 54% of the North American Social Expression Products segment’s revenue in 2013, 2012 and 2011, respectively, is attributable to its top five customers. Approximately 48%, 48% and 44% of the International Social Expression Products segment’s revenue in 2013, 2012 and 2011, respectively, is attributable to its top three customers.

In 2013, the Corporation acquired approximately 400 retail stores in the United Kingdom that are being operated under the “Clintons” brand through its new Retail Operations segment. The stores sell products purchased from the International Social Expression Products segment as well as products purchased from other vendors. Intersegment sales and profits from the International Social Expression Products segment to the Retail Operations segment are eliminated in consolidation. Consolidated operating results include the results of the Retail Operations segment from the acquisition date of June 6, 2012 until February 2, 2013, the end of the segment’s fiscal year. See Note 2 for more information.

AG Interactive distributes social expression products, including electronic greetings and a broad range of graphics and digital services and products, through a variety of electronic channels, including Web sites, Internet portals 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.

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.

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 insurance programs, among other costs, are included in the unallocated items.

Operating Segment Information

	Total Revenue
	2013			2012		2011
North American Social Expression Products	$	1,245,269		$	1,228,548	$	1,196,809
International Social Expression Products		331,753			347,866		261,712
Intersegment items		(55,892	)		—		—
Net		275,861			347,866		261,712
Retail Operations		244,106			—		—
AG Interactive		64,440			68,514		78,206
Non-reportable segments		39,063			50,216		61,167
	$	1,868,739		$	1,695,144	$	1,597,894

	Segment Earnings (Loss) Before Tax
	2013			2012			2011
North American Social Expression Products	$	160,052		$	149,655		$	194,199
International Social Expression Products		(10,555	)		20,276			19,572
Intersegment items		(2,873	)		—			—
Net		(13,428	)		20,276			19,572
Retail Operations		6,581			—			—
AG Interactive		16,465			13,942			13,991
Non-reportable segments		6,586			17,034			9,477
Unallocated:
Interest expense		(17,896	)		(53,073	)		(25,304	)
Profit-sharing expense		(7,536	)		(9,401	)		(9,759	)
Stock-based compensation expense		(10,743	)		(10,982	)		(13,017	)
Corporate overhead expense		(54,167	)		(29,636	)		(33,152	)
		(90,342	)		(103,092	)		(81,232	)
	$	85,914		$	97,815		$	156,007

See Note 2 for Segment information related to certain charges associated with activities and transactions in connection with the acquisition of Clinton Cards.

	Depreciation and Intangible Assets Amortization						Capital Expenditures
	2013		2012		2011		2013		2012		2011
North American Social Expression Products	$	36,021	$	33,823	$	34,238	$	87,778	$	56,716	$	32,296
International Social Expression Products		5,335		4,771		4,431		4,169		5,561		3,502
Retail Operations		2,780		—		—		11,426		—		—
AG Interactive		2,556		2,622		4,143		2,080		1,949		2,762
Non-reportable segments		1,719		1,661		1,701		690		2,223		1,130
Unallocated		994		789		708		8,006		11,758		72
	$	49,405	$	43,666	$	45,221	$	114,149	$	78,207	$	39,762

	Assets
	2013		2012
North American Social Expression Products	$	1,060,810	$	1,032,326
International Social Expression Products		101,044		155,530
Retail Operations		87,026		—
AG Interactive		9,036		10,799
Non-reportable segments		32,292		36,251
Unallocated and intersegment items		293,255		314,558
	$	1,583,463	$	1,549,464

Geographical Information

	Total Revenue						Property, Plant and Equipment—Net
	2013		2012		2011		2013		2012
United States	$	1,217,461	$	1,214,715	$	1,207,072	$	318,054	$	257,548
United Kingdom		471,945		296,472		216,309		44,660		21,136
Other international		179,333		183,957		174,513		9,738		9,092
	$	1,868,739	$	1,695,144	$	1,597,894	$	372,452	$	287,776

Product Information

	Total Revenue
	2013		2012		2011
Everyday greeting cards	$	889,895	$	832,454	$	755,799
Seasonal greeting cards		466,167		411,605		377,831
Gift packaging		265,107		241,641		223,093
Other revenue		26,195		31,863		32,355
All other products		221,375		177,581		208,816
	$	1,868,739	$	1,695,144	$	1,597,894

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

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 $6,975, $5,247 and $6,944 in 2013, 2012 and 2011, respectively, related to headcount reductions and facility closures at several locations.

The following table summarizes the severance charges by segment:

	2013			2012		2011
North American Social Expression Products	$	4,103		$	4,610	$	4,737
International Social Expression Products		2,136			162		773
Retail Operations		724			—		—
AG Interactive		(1	)		381		900
Non-reportable		13			94		37
Unallocated		—			—		497
Total	$	6,975		$	5,247	$	6,944

The remaining balance of the severance accrual was $6,029 and $6,761 at February 28, 2013 and February 29, 2012, 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.