NOTE 19 – 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 58%, 55% and 55% of the North American Social Expression Products segment’s revenue in 2014, 2013 and 2012, respectively, is attributable to its top five customers. Approximately 50%, 48% and 48% of the International Social Expression Products segment’s revenue in 2014, 2013 and 2012, respectively, is attributable to its top three customers.

In 2013, the Corporation acquired card and gift retail stores in the United Kingdom that are being operated under the “Clintons” brand through its Retail Operations segment. At February 28, 2014, the Retail Operations segment operated 396 retail stores, which includes 388 stores acquired from administration and new stores. 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 for 2013 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 3 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
	2014			2013			2012
North American Social Expression Products	$	1,253,842		$	1,245,269		$	1,228,548

International Social Expression Products		306,519			331,753			347,866
Intersegment items		(56,729	)		(55,892	)		—

Net		249,790			275,861			347,866

Retail Operations		332,066			244,106			—

AG Interactive		61,084			64,440			68,514

Non-reportable segments		72,884			39,063			50,216

	$	1,969,666		$	1,868,739		$	1,695,144


	Segment Earnings (Loss) Before Tax
	2014			2013			2012
North American Social Expression Products	$	172,502		$	160,052		$	149,655

International Social Expression Products		11,380			(10,555	)		20,276
Intersegment items		(2,110	)		(2,873	)		—

Net		9,270			(13,428	)		20,276

Retail Operations		(4,637	)		6,581			—

AG Interactive		15,540			16,465			13,942

Non-reportable segments		24,521			6,586			17,034

Unallocated:
Interest expense		(27,363	)		(17,896	)		(53,073	)
Profit-sharing plan expense		(9,149	)		(7,536	)		(9,401	)
Stock-based compensation expense		(13,812	)		(10,743	)		(10,982	)
Corporate overhead expense		(53,646	)		(54,167	)		(29,636	)

		(103,970	)		(90,342	)		(103,092	)

	$	113,226		$	85,914		$	97,815

For 2014, stock-based compensation in the table above includes stock-based compensation prior to the Merger and the impact of the settlement of stock options and the cancellation or modification of outstanding restricted stock units and performance shares concurrent with the Merger, a portion of which is non-cash. There is no stock-based compensation subsequent to the Merger as these plans were converted into cash compensation plans at the time of the Merger. See Note 2 for further information.

See Note 3 for Segment information related to certain prior year charges associated with activities and transactions in connection with the acquisition of Clinton Cards in 2013 that do not have comparative amounts in the current year; and Note 2 for current year charges associated with the Merger that do not have comparative amounts in the prior year.


	Depreciation and Intangible Assets Amortization						Capital Expenditures
	2014		2013		2012		2014		2013		2012
North American Social Expression Products	$	37,751	$	36,021	$	33,823	$	37,618	$	87,778	$	56,716

International Social Expression Products		4,748		5,335		4,771		2,759		4,169		5,561

Retail Operations		6,888		2,780		—		8,054		11,426		—

AG Interactive		2,395		2,556		2,622		267		2,080		1,949

Non-reportable segments		1,773		1,719		1,661		2,718		690		2,223

Unallocated		1,728		994		789		2,681		8,006		11,758

	$	55,283	$	49,405	$	43,666	$	54,097	$	114,149	$	78,207


	Assets
	2014		2013
North American Social Expression Products	$	1,132,145	$	1,060,810

International Social Expression Products		86,100		101,044

Retail Operations		103,185		87,026

AG Interactive		6,121		9,036

Non-reportable segments		36,915		32,292

Unallocated and intersegment items		237,977		293,255

	$	1,602,443	$	1,583,463

Geographical Information


	Total Revenue						Property, Plant and Equipment - Net
	2014		2013		2012		2014		2013
United States	$	1,258,328	$	1,217,461	$	1,214,715	$	319,137	$	318,054
United Kingdom		538,684		471,945		296,472		47,071		44,660
Other international		172,654		179,333		183,957		9,557		9,738

	$	1,969,666	$	1,868,739	$	1,695,144	$	375,765	$	372,452

Product Information


	Total Revenue
	2014		2013		2012
Everyday greeting cards	$	921,000	$	889,895	$	832,454
Seasonal greeting cards		473,013		466,167		411,605
Gift packaging and party goods		277,378		265,107		241,641
Other revenue		27,857		26,195		31,863
All other products		270,418		221,375		177,581

	$	1,969,666	$	1,868,739	$	1,695,144

The “All other products” classification includes, among other things, giftware, 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 $6,890, $6,975 and $5,247 in 2014, 2013 and 2012, respectively, related to headcount reductions and facility closures at several locations.

The following table summarizes the severance charges by segment:


	2014		2013			2012
North American Social Expression Products	$	3,020	$	4,103		$	4,610
International Social Expression Products		2,094		2,136			162
Retail Operations		585		724			—
AG Interactive		1,004		(1	)		381
Non-reportable		187		13			94
Unallocated		—		—			—

Total	$	6,890	$	6,975		$	5,247

The remaining balance of the severance accrual was $3,974 and $6,029 at February 28, 2014 and 2013, 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.