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%, 58% and 55% of the North American Social Expression Products segment’s revenue in 2015, 2014 and 2013, respectively, is attributable to its top five customers. Approximately 54%, 50% and 48% of the International Social Expression Products segment’s revenue in 2015, 2014 and 2013, 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, 2015, the Retail Operations segment operated 412 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 segment primarily includes licensing activities and, prior to the disposition of AGI In-Store on August 29, 2014, the design, manufacture and sale of display fixtures. See Note 3 for additional information regarding the sale of AGI In-Store.

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, 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, prior to the Merger, 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
	2015			2014			2013
North American Social Expression Products	$	1,316,617		$	1,253,842		$	1,245,269
International Social Expression Products		319,825			306,519			331,753
Intersegment items		(62,229	)		(56,729	)		(55,892	)

Net		257,596			249,790			275,861
Retail Operations		336,860			332,066			244,106
AG Interactive		58,995			61,084			64,440
Non-reportable segment		40,901			72,884			39,063

	$	2,010,969		$	1,969,666		$	1,868,739


	Segment Earnings (Loss) Before Tax
	2015			2014			2013
North American Social Expression Products	$	193,176		$	172,502		$	160,052
International Social Expression Products		10,530			11,380			(10,555	)
Intersegment items		(3,022	)		(2,110	)		(2,873	)

Net		7,508			9,270			(13,428	)
Retail Operations		(35,007	)		(4,637	)		6,581
AG Interactive		21,668			15,540			16,465
Non-reportable segment		9,810			24,521			6,586
Unallocated:
Interest expense		(36,020	)		(27,363	)		(17,896	)
Profit-sharing plan expense		(9,180	)		(9,149	)		(7,536	)
Stock-based compensation expense		—			(13,812	)		(10,743	)
Corporate overhead expense		(41,249	)		(53,646	)		(54,167	)

		(86,449	)		(103,970	)		(90,342	)

	$	110,706		$	113,226		$	85,914

For 2014, “Stock-based compensation expense” 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.

For 2015, “Corporate overhead expense” in the table above includes a gain of $35,004 from the sale of AGI In-Store and a non-cash charge of $21,924 in connection with the impairment of the Clinton Cards tradename. In addition, during 2015, the Corporation sold its current world headquarters location and recognized a non-cash loss on disposal of $15,544, of which $13,361 was recorded within the North American Social Expression Products segment and $2,183 was recorded in “Corporate overhead expense”.

See Note 2 for charges associated with the Merger in 2014 that do not have comparative amounts in the current year and Note 3 for Segment information related to certain nonrecurring charges in 2013 associated with activities and transactions in connection with the acquisition of Clinton Cards.


	Depreciation and Intangible Assets Amortization						Capital Expenditures
	2015		2014		2013		2015		2014		2013
North American Social Expression Products	$	41,443	$	37,751	$	36,021	$	37,429	$	37,618	$	87,778
International Social Expression Products		4,437		4,748		5,335		16,496		2,759		4,169
Retail Operations		10,417		6,630		2,780		22,779		8,054		11,426
AG Interactive		1,523		2,395		2,556		1,961		267		2,080
Non-reportable segment		1,128		1,773		1,719		32		2,718		690
Unallocated		905		1,728		994		12,469		2,681		8,006

	$	59,853	$	55,025	$	49,405	$	91,166	$	54,097	$	114,149


	Assets
	2015		2014
North American Social Expression Products	$	1,053,178	$	1,132,145
International Social Expression Products		108,709		86,100
Retail Operations		106,600		103,185
AG Interactive		5,874		6,121
Non-reportable segment		14,101		36,915
Unallocated and intersegment items		247,233		237,977

	$	1,535,695	$	1,602,443

Geographical Information


	Total Revenue						Property, Plant and Equipment - Net
	2015		2014		2013		2015		2014
United States	$	1,291,053	$	1,258,328	$	1,217,461	$	309,935	$	319,137
United Kingdom		555,961		538,684		471,945		62,968		47,071
Other international		163,955		172,654		179,333		7,394		9,557

	$	2,010,969	$	1,969,666	$	1,868,739	$	380,297	$	375,765

Product Information


	Total Revenue
	2015		2014		2013
Everyday greeting cards	$	944,771	$	915,794	$	894,971
Seasonal greeting cards		490,089		470,298		466,794
Gift packaging and party goods		340,759		308,735		286,993
Other revenue		24,617		27,857		26,195
All other products		210,733		246,982		193,786

	$	2,010,969	$	1,969,666	$	1,868,739

The “All other products” classification includes, among other things, stationery, 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 $5,418, $6,890 and $6,975 in 2015, 2014 and 2013, respectively, related to headcount reductions and facility closures at several locations.

The following table summarizes the severance charges by segment:


	2015		2014		2013
North American Social Expression Products	$	2,706	$	3,020	$	4,103
International Social Expression Products		2,420		2,094		2,136
Retail Operations		208		585		724
AG Interactive		84		1,004		(1	)
Non-reportable		—		187		13
Unallocated		—		—		—

Total	$	5,418	$	6,890	$	6,975

The remaining balance of the severance accrual was $4,303 and $3,974 at February 28, 2015 and 2014, 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.