InterestTable paidof in cash on debt was $31,311, $46,869 and $19,184 in 2015, 2014 and 2013, respectively. Contents

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InterestTable paidof in cash on debt was $31,311, $46,869 and $19,184 in 2015, 2014 and 2013, respectively. Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended February 2829, ~~2015~~2016

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 1-13859

American Greetings Corporation

(Exact name of registrant as specified in its charter)


Ohio		34-0065325
(State or other jurisdiction of incorporation or organization)		(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

Securities registered pursuant to Section 12(b) of the Act:

None.

Securities registered pursuant to Section 12(g) of the Act:

None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ¨ NO x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES x NO ¨

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ¨ NO x

Indicate by a check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES x NO ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES ¨ NO x

State the aggregate market value of the voting and non-voting stock held by non-affiliates of the registrant as of the last business day of the registrant’s most recently completed second fiscal quarter: All of the outstanding capital stock of the registrant is held by Century Intermediate Holding Company and, as such, there is no market for the capital stock of the registrant. As of May 15 26, ~~2015~~2016 and August 3028, ~~2014~~2015, 100 shares of the registrant’s common stock, par value $0.01 per share, were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None.

AMERICAN GREETINGS CORPORATION

			PageNumber
PART I
	Item 1.	Business		1
	Item 1A.	Risk Factors		7
	Item 1B.	Unresolved Staff Comments		1718
	Item 2.	Properties		1719
	Item 3.	Legal Proceedings		1920
	Item 4.	Mine Safety Disclosures		1920
PART II
	Item 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		2021
	Item 6.	Selected Financial Data		22
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		23
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		4344
	Item 8.	Financial Statements and Supplementary Data		4445
	Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		8988
	Item 9A.	Controls and Procedures		8988
	Item 9B.	Other Information		9088
PART III
	Item 10.	Directors, Executive Officers and Corporate Governance		9189
	Item 11.	Executive Compensation		9694
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		~~127~~118
	Item 13.	Certain Relationships and Related Transactions, and Director Independence		~~128~~119
	Item 14.	Principal Accounting Fees and Services		~~133~~124
PART IV
	Item 15.	Exhibits, Financial Statement Schedules		~~134~~125
	SIGNATURES			~~143~~134

PART I

Unless otherwise indicated or the context otherwise requires, the “Corporation,” “we,” “our,” “us” and “American Greetings” are used in this report to refer to the businesses of American Greetings Corporation and its consolidated subsidiaries.

Item 1.

Business

Overview

Founded in 1906, American Greetings designs, manufactures and/or distributes social ~~expressions~~expression products. We manufacture or sell greeting cards, gift packaging, party goods, stationery and giftware in North America, primarily in the United States and Canada, and throughout the world, primarily in the United Kingdom, Australia and New Zealand. In addition, our subsidiary, AG Interactive, Inc., ~~distributes~~ distributes social expression products, including electronic greetings and a broad range of ~~graphics and~~ digital content, services and products, through a variety of electronic channels, including Web sites, Internet portals and electronic mobile devices. We also engage in design and character licensing and, as of February 2829, ~~2015~~2016, operated ~~412~~397 card and gift retail stores throughout the United Kingdom. In addition, until its sale in August 2014, we operated a fixture manufacturing business through which we manufactured custom display fixtures for our products and the products of others. Our fiscal year ends on February 28 or 29. References to a particular year refer to the fiscal year ending in February of that year. For example, ~~2015~~2016 refers to to the fiscal year ended February 2829, ~~2015~~2016. The Corporation’s Retail Operations segment is consolidated on a one-month lag corresponding with its fiscal year -end of January 3130, ~~2015~~2016.

2013 Going Private Transaction

On September 26, 2012, American Greetings announced that its Board of Directors received a non-binding proposal from Zev Weiss, the Corporation’s then Chief Executive Officer, and Jeffrey Weiss, the Corporation’s then President and Chief Operating Officer, on behalf of themselves and certain other members of the Weiss family and related parties to acquire all of the outstanding Class A common shares and Class B common shares of American Greetings not currently owned by them (the “Going Private Proposal”). In connection with the Going Private Proposal, on March 29, 2013, American Greetings signed an agreement and plan of merger (as amended on July 3, 2013, the “Merger Agreement”), among the Corporation, Century Intermediate Holding Company, a Delaware corporation (“CIHC”), and Century Merger Company, an Ohio corporation (“Merger Sub”). At a special meeting of shareholders held on August 7, 2013, the shareholders of American Greetings voted to adopt the Merger Agreement, and the merger contemplated thereby (the “Merger”). On August 9, 2013, the Corporation completed the Merger. As a result of the Merger, American Greetings became wholly -owned by CIHC, which in turn is indirectly wholly-owned by Morry Weiss, the Chairman of the Board, Zev Weiss, a director and Co-Chief Executive Officer, Jeffrey Weiss, a director and Co-Chief Executive Officer, Elie Weiss, a director and President of Real Estate, and Gary Weiss, a director and a Vice President of the Corporation, and certain other members of the Weiss family and related entities (the “Family Shareholders”). At the effective time of the Merger, each issued and outstanding share of the Corporation (other than shares owned by American Greetings, CIHC (which at the effective time of the Merger included all shares previously held by the Family Shareholders) or Merger Sub) was converted into the right to receive $19.00 per share in cash. All other shares of American Greetings were cancelled without consideration. ~~Further details of the Merger are provided in Note 2 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report.~~

In connection with the financing of the Merger, CIHC issued $245 million in aggregate stated value of non-voting preferred stock to AG Investment, LLC, which was redeemed on February 10, 2014 with part of the net proceeds of the $285 million aggregate principal amount of 9.750%/10.500% Senior PIK Toggle Notes issued by an indirect parent of CIHC, as well as borrowings under American Greetings’ revolving credit facility described below. Furthermore, American Greetings entered into a $600 million secured credit agreement, which provides for a $350 million term loan facility and a $250 million revolving credit facility. The term loan facility was fully drawn on August 9, 2013, the closing date of the Merger. Further details of the Merger are provided in Note 2 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report.

Products

~~Products~~ Greetings, Recycled Paper Greetings, Papyrus, Carlton Cards, Gibson, Tender Thoughts, Just For You, Today and Always, justwink, Inventions and P.S. Hello, as well as other paper product offerings such as DesignWare party goods and Plus Mark gift wrap and boxed cards. Electronic greetings and other digital content, services and products are available through our subsidiary, AG Interactive, Inc. Our major Internet brands include AmericanGreetings.com, BlueMountain.com, justwink.com and Cardstore.com. We also create and license our intellectual properties, such as the “Care Bears” characters. Prior to August 2014, we also produced AGI In-Store display fixtures for our products and for other vendors through our then wholly-owned subsidiary, A.G. Industries, Inc. Further details about the sale of A.G. Industries, Inc. are provided in Note 3 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report. Information concerning sales by major product category is included in Part II, Item 7 of this Annual Report.

American Greetings designs, manufactures and/or distributes social expression products including greeting cards, gift packaging, party goods, giftware and stationery. Our major domestic greeting card brands are American Greetings, Recycled Paper Greetings, Papyrus, Carlton Cards, Gibson, Tender Thoughts and Just For You, as well as other paper product offerings such as DesignWare party goods and Plus Mark gift wrap and boxed cards. Electronic greetings and other digital content, services and products are available through our subsidiary, AG Interactive, Inc. Our major Internet brands include AmericanGreetings.com, BlueMountain.com and Cardstore.com. We also create and license our intellectual properties, such as the “Care Bears” characters. Prior to August 2014, we also produced AGI In-Store display fixtures for our products and for other vendors through our then wholly-owned subsidiary, A.G. Industries, Inc. Further details about the sale of A.G. Industries, Inc. are provided in Note 3 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report. Information concerning sales by major product classifications is included in Part II, Item 7 of this Annual Report.

Business Segments

At February 2829, ~~2015~~2016, we operated in five business segments: North American Social Expression Products, International Social Expression Products, Retail Operations, AG Interactive and ~~non~~Non-reportable ~~operating segments~~segment. For information regarding the various business segments comprising our business, see the discussion included in Part II, Item 7 and in Note 19 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report.

Concentration of Credit Risks

Net sales to our five largest customers, which include mass merchandisers, accounted for approximately 4042% of total revenue in ~~2015~~2016 and approximately 3940% of total revenue in ~~each~~2015 and 39% of ~~2014~~total ~~and~~revenue ~~2013~~in 2014. Net sales to Wal-Mart Stores, Inc. and its subsidiaries accounted for approximately 1415% of total revenue in ~~2015~~2016, ~~2014~~and approximately 14% in each of 2015 and ~~2013~~2014. Net sales to Target Corporation accounted for approximately 1314% of total revenue in ~~2015~~2016, ~~2014~~and approximately 13% of total revenue in each of 2015 and ~~2013~~2014. No other customer accounted for 10% or more of our consolidated total revenue in ~~2015~~2016, ~~2014~~2015 or ~~2013~~2014. Approximately 58%, ~~58% and 55%~~ of the North American Social Expression Products segment’s revenue in ~~2015~~each of 2016, ~~2014~~2015 and ~~2013,~~ ~~respectively,~~2014 was attributable to its top five customers. Approximately 5459%, 5054% and 4850% of the International Social Expression Products segment’s revenue in ~~2015~~2016, ~~2014~~2015 and ~~2013~~2014, respectively, excluding sales to the Retail Operations segment, was attributable to its top three customers.

Competition

The market for social ~~expressions~~expression products is large, evolving, and intensely competitive, and we expect competition to increase in the future with the rapidly growing use by consumers of electronic devices and the Internet to express themselves and to communicate with others. We compete with the growing number of media by which consumers express themselves and connect with others, whether by way of traditional tangible greeting cards purchased at retail stores; tangible greeting cards that incorporate personalized messages and/or images purchased at retail stores, over the Internet or using mobile devices; electronic greeting cards delivered over the Internet or using mobile devices; or social media companies that host and enable mobile access to and posting of greetings and images. We face intense competition from a wide range of companies, including the following:

• Traditional greeting card businesses that offer paper greeting cards through a variety of channels of distribution, including retail outlets and mobile and other electronic devices, such as Hallmark Cards, Inc., Shutterfly, Tiny Prints, which is a service of Shutterfly, Avanti, Snapfish, ~~which is a service of Hewlett-Packard,~~ Vistaprint, ~~Apple iTunes,~~ International Greetings, Paperchase, moonpig.com and Card Factory, as well as hundreds of small paper greeting card publishers;

•

Social media companies that host and enable mobile access to and posting of greetings and images, such as Facebook, Instagram, Twitter, Pinterest and Google+;

• Photo hosting websites that allow users to upload and share images and messages at no cost such as Apple ~~iTunes~~iCloud, Picasa, Flickr, Imgur, and Photobucket;

• “Big Box” retailers, drug store chains and others that offer consumers the ability to create greeting cards and other social ~~expressions~~expression products that incorporate photographs and other personal messages, which compete directly with some of our offerings; ~~and~~

• Specialized companies that offer electronic greeting cards such as Hallmark, Shutterfly, Tiny Prints, which is a service byof Shutterfly, JibJab, 123 Greetings, someecards, Minted, Picaboo, ~~Blurb~~LovePop, Mixbook, ~~MOO~~Cleverbug, Smilebox, ~~Creative~~Sincerely, ~~Memories~~Card Isle, and Photobook America.; and

•

Small or specialized companies that sell their products using online marketplaces such as Amazon, Etsy and Pinterest.

We believe the primary competitive factors in attracting and retaining customers are:

•

Brand recognition and trust;

•

Quality of products and designs;

•

Breadth of products;

•

User affinity and loyalty;

•

Customer service;

•

Ease of use;

•

Convenience and speed of delivery; and

• Price and other terms of sales to ~~retail customers~~retailers, which may include payments and other concessions under long-term agreements.

We believe that we compete favorably with respect to many of these factors, particularly product quality, design and breadth. Generally, we distinguish ourselves from such competitors principally on the basis of product quality and design.

Production and Distribution

In ~~2015~~2016, our channels of distribution continued to be primarily through mass retail, which is comprised of three distinct channels: mass merchandisers; chain drug stores; and supermarkets. In addition, we sell our products through a variety of other distribution channels, including card and gift shops, department stores, military post exchanges, variety stores and combo stores (stores combining food, general merchandise and drug items). We also sell our products through the ~~over~~approximately 400 card and gift retail stores that we operate in the United Kingdom through our Retail Operations segment. In addition, we sell greeting cards through our Cardstore.com Web site, which provides consumers the ability to purchase physical greeting cards, including custom cards that incorporate their own photos and sentiments, as well as to have us send the unique greeting card that they select directly to the recipient. From time to time, we also sell our products to independent, third-party distributors. Our AG Interactive segment provides social expression content, including electronic greeting cards, through Internet and mobile platforms.

Many of our products are manufactured at common production facilities and marketed by a common sales force. Our manufacturing operations involve complex processes including printing, die cutting, hot stamping and embossing. We employ modern printing techniques that allow us to perform short runs and multi-color printing, have a quick changeover and utilize direct-to-plate technology, which minimizes time to market. Our products are manufactured globally, primarily at facilities located in North America. We also source products from domestic and foreign third-party suppliers, including suppliers in China and Mexico. Additional information by geographic area is included in Note 19 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report.

Production of our products is generally on a level basis throughout the year, with the exception of gift packaging for which production generally peaks in advance of the Christmas season. Everyday inventories (such as birthday and anniversary -related products) remain relatively constant throughout the year, while seasonal inventories peak in advance of each major holiday season, including Christmas, Valentine’s Day, Easter, Mother’s Day, Father’s Day and Graduation. Payments for seasonal shipments are generally received during the month in which the major holiday occurs, or shortly thereafter. Extended payment terms may also be offered in response to competitive situations with individual customers. Payments for both everyday and seasonal sales from customers that are on a scan-based trading (“SBT”) model are received ~~generally~~after ~~within 10 to 15 days of~~ the product ~~being~~is sold by those customers at their retail locations. As of February 2829, ~~2015~~2016, three of our five largest customers conduct business with us under an SBT model. The core of this business model rests with American Greetings owning the product delivered to its retail customers until the product is sold by the retailer to the ultimate consumer, at which time we record the sale. ~~American~~ American Greetings often sells seasonal greeting cards and other seasonal products with the right of return. Sales of other products are generally sold without the right of return. Sales credits for these products are issued at our discretion for damaged, obsolete and outdated products. Information regarding the return of product is included in Note 1 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report.

generally sold without the right of return. Sales credits for these products are issued at our discretion for damaged, obsolete and outdated products. Information regarding the return of product is included in Note 1 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report.

During the year, we experienced no material difficulties in obtaining raw materials from our suppliers.

Intellectual Property Rights

We have a number of trademarks, service marks, trade secrets, copyrights, inventions, patents, and other intellectual property, which are used in connection with our products and services. Our designs, artwork, musical compositions, photographs and editorial verse are protected by copyright. In addition, we seek to register our trademarks in the United States and elsewhere. We routinely seek protection of our inventions by filing patent applications for which patents may be granted. We also obtain license agreements for the use of intellectual property owned or controlled by others. Although the licensing of intellectual property produces additional revenue, we do not believe that our operations are dependent upon any individual invention, trademark, service mark, copyright, patent or other intellectual property license. Collectively, our intellectual property is an important asset to us. As a result, we follow an aggressive policy of protecting and enforcing our rights in our intellectual property ~~and intellectual property licenses~~.

Employees

At February 2829, ~~2015~~2016, we employed approximately 67,~~900~~000 full-time employees and approximately 2120,500 part-time employees which, when jointly considered, equate to approximately 17,~~600~~250 full-time equivalent employees. Approximately ~~700~~725 of our employees are unionized and covered by collective bargaining agreements.

The following table sets forth by location the unions representing our employees, together with the expiration date, ~~if any,~~ of the applicable governing collective bargaining agreement. We believe that labor relations at each location in which we operate have generally been satisfactory.

Union	Location	Contract Expiration Date
Unite the Union (Dewsbury)	Leeds, England	N/A
Unite the Union (Corby)	Derby, England	N/A
International Brotherhood of Teamsters	Bardstown, Kentucky	March 25, 2017
International Brotherhood of Teamsters	Cleveland, Ohio	March 31, 2018
Workers United	Greeneville, Tennessee	October 19, 2017

Supply Agreements

In the normal course of business, we enter into agreements with certain customers for the supply of greeting cards and related products. We view the use of such agreements as advantageous in developing and maintaining business with our retail customers. Under these agreements, the customer may receive a combination of cash payments, credits, discounts, allowances and other incentive considerations to be earned by the customer as product is purchased from us over the stated term of the agreement or the minimum purchase volume commitment. The agreements are negotiated individually to meet competitive situations and, therefore, while some aspects of the agreements may be similar, important contractual terms may vary. The agreements may or may not specify American Greetings as the sole supplier of social expression products to the customer. In the event an agreement is not completed, in most instances, we have a claim for unearned advances under the agreement.

Although risk is inherent in the granting of advances or fixed payments on a term agreement, we subject such customers to our normal credit review. These advances are accounted for as deferred costs. We maintain ana general allowance for deferred costs based on estimates developed by using standard quantitative measures incorporating historical write-offs. In instances where we are aware of a particular customer’s inability to meet its performance obligation, or lower than expected future cash flows in a fixed term agreement are insufficient to recover the deferred cost, we record a specific allowance to reduce the deferred cost asset to our estimate of its future value based upon expected ~~recovery~~recoverability. ~~Losses~~Depending on the amount of the loss attributed to these specific ~~events~~instances, ~~have~~such ~~historically~~losses ~~not~~could ~~been~~have a material adverse effect on our consolidated financial position and results of operations for a particular period, depending, in part, upon the operating results for such period. See Note 10 to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report, and the discussion under the “Deferred Costs” heading in the “Critical Accounting ~~Policies~~Estimates” in Part II, Item 7 of this Annual Report for further information and discussion of deferred costs.

Environmental and Governmental Regulations

Our business is subject to numerous foreign and domestic environmental laws and regulations maintained to protect the environment. These environmental laws and regulations apply to chemical usage, air emissions, wastewater and storm water discharges and other releases into the environment as well as the generation, handling, storage, transportation, treatment and disposal of waste materials, including hazardous waste. Although we believe that we are in substantial compliance with all applicable laws and regulations, because legal requirements frequently change and are subject to interpretation, these laws and regulations may give rise to claims, uncertainties or possible loss contingencies for future environmental remediation liabilities and costs. We have implemented various programs designed to protect the environment and comply with applicable environmental laws and regulations. The costs associated with these compliance and remediation efforts have not had and are not expected to have a material adverse effect on our financial condition, cash flows or operating results. In addition, the impact of increasingly stringent environmental laws and regulations, regulatory enforcement activities, the discovery of unknown conditions and third -party claims for damages to the environment, real property or persons could also result in additional liabilities and costs in the future.

The legal environment of the Internet, e-commerce and mobile communications is evolving rapidly in the United States and elsewhere. The manner in which existing laws and regulations will be applied to the Internet and mobile communications in general, and how they will relate to our business in particular, is unclear in many cases. Accordingly, we often cannot be certain how existing laws will apply in the online and mobile context, including with respect to such topics as privacy, consent, defamation, pricing, credit card fraud, advertising, taxation, sweepstakes, promotions, content regulation, net neutrality, quality of products and services and intellectual property ownership and infringement. In particular, legal issues relating to the liability of providers of online and mobile services for activities of their users, as well as their obligations to protect the privacy of their users, including with respect to law enforcement’s attempts to access user data, are currently unsettled both within the United States and abroad.

Numerous laws have been adopted at the national and state level in the United States that could have an impact on our business, especially as the laws are applied to new technologies in the Internet and mobile space. These laws include, but are not limited to, the following:

• The CAN-SPAM Act of 2003 and similar laws adopted by a number of states. These laws are intended to regulate unsolicited commercial ~~e-mails~~emails, create criminal penalties for unmarked sexually-oriented material and ~~e-mails~~emails containing fraudulent headers and control other abusive online marketing practices.

• The Communications Decency Act (“CDA”), which gives statutory protection to online service providers who distribute unrelated third-party content.

• The ~~Digital~~Video ~~Millennium~~Privacy ~~Copyright~~Protection Act, which isprohibits ~~intended~~a tovideo ~~reduce~~tape ~~the liability of online~~ service ~~providers~~provider ~~for~~from ~~listing~~knowingly ordisclosing ~~linking~~ to ~~third-party~~any ~~Web~~person ~~sites~~personally ~~that~~identifiable ~~include~~information ~~materials~~about ~~that~~a ~~infringe copyrights or other rights of others~~consumer.

•

The Digital Millennium Copyright Act (“DMCA”), which is intended to reduce the liability of online service providers for listing or linking to third-party Web sites that include materials that infringe copyrights or other rights of others.

•

The Children’s Online Privacy Protection Act and the Prosecutorial Remedies and Other Tools to End Exploitation of Children Today Act of 2003, and similar laws adopted by a number of states. These laws are intended to restrict the distribution of certain materials deemed harmful to children and impose additional restrictions on the ability of online services to collect user information from minors. In addition, the Protection of Children From Sexual Predators Act of 1998 requires online service providers to report evidence of violations of federal child pornography laws under certain circumstances.

• ~~Federal~~The ~~Trade~~Telephone ~~Commission~~Consumer Protection Act, ~~Title~~of 51991 -(“TCPA”) ~~Unfair~~which, &among ~~Deceptive~~other ~~Acts~~things, &restricts ~~Practices~~the ~~and~~making ~~similar laws adopted by a number~~ of ~~states. These laws generally prohibit businesses from engaging in unfair or deceptive acts or practices~~calls, ~~including~~faxes ~~by misrepresenting data privacy~~ and ~~security.~~texts ~~Federal~~by ~~Trade~~an ~~Commission~~autodialer ~~and~~unless ~~state~~proper ~~rules~~consent ~~and~~is ~~guidelines~~obtained ~~also~~or ~~may~~appropriate ~~impact~~disclosures ~~online~~are ~~conduct, including privacy, data security and marketing~~given.

• The ~~federal~~Federal ~~Credit~~Trade ~~Card~~Commission ~~Accountability~~Act, ~~Responsibility~~Title ~~and~~5 ~~Disclosure~~- ~~Act~~Unfair of& ~~2009~~Deceptive Acts & Practices (the “~~CARD~~FTC Act”), ~~which~~and ~~was~~similar ~~signed~~laws ~~into~~adopted ~~law~~by ~~May~~a ~~22,~~number ~~2009, includes new provisions governing the use~~ of ~~gift~~states ~~cards,~~which ~~including~~prohibit ~~specific~~companies ~~disclosure~~from ~~requirements~~engaging ~~and~~in aunfair ~~prohibition~~ or ~~limitation~~deceptive onacts, ~~the~~including ~~use~~misrepresenting ofdata ~~expiration~~privacy ~~dates~~ and ~~fees~~security. ~~Furthermore,~~The aFederal ~~recent~~Trade ~~statute~~Commission ~~adopted~~has bybeen ~~the~~taking ~~State~~enforcement ofactions ~~New~~against ~~Jersey~~companies ~~would~~for ~~enforce~~privacy ~~escheat~~violations ofunder ~~the~~section ~~entire~~5 ~~remaining~~of ~~gift card balance when~~ the ~~card~~FTC ~~is redeemable only for goods and services and would apply to all gift cards sold after January 1, 2003~~Act.

~~Data~~• ~~privacy~~The ~~and~~Federal ~~security~~Credit ~~with~~Card ~~respect~~Accountability toResponsibility ~~the~~and ~~collection~~Disclosure ~~use,~~Act ~~storage~~of 2009, ~~transfer~~which ~~and~~was ~~disposal~~signed ofinto ~~personally identifiable~~law ~~information~~May ~~continues~~22, to2009, beincludes anew ~~focus~~provisions ofgoverning ~~worldwide~~the ~~legislation~~use ~~and~~of ~~compliance~~gift ~~review.~~cards, ~~Most~~including ~~states,~~specific asdisclosure ~~well~~requirements asand ~~many~~a ~~regulators,~~prohibition ~~have~~or ~~requirements~~limitation ~~for~~on the ~~disclosure~~use of ~~certain~~expiration ~~breaches~~dates ofand ~~security~~fees. ~~impacting~~A ~~personal~~number ~~data, or other disclosures~~ of ~~personal~~states ~~data.~~have ~~The~~also ~~requirements~~adopted ~~currently~~laws ~~vary~~governing bythe ~~jurisdiction~~use, expiration and ~~are~~escheatment ~~subject~~of togift ~~frequent changes~~cards.

•

State Data Breach Notification Laws, which require companies to provide notice to consumers of the unauthorized acquisition of sensitive information. The requirements currently vary by jurisdiction and are subject to frequent changes.

We post on our Web sites our privacy notices, policies and practices concerning the collection, use, storage, transfer, and disposal of user data. Any failure by us to comply with our posted privacy notices, internal policies, Federal Trade Commission requirements or other privacy-related laws and regulations could result in proceedings that could potentially harm our business, results of operations and financial condition.

In addition, many foreign jurisdictions, including those in which we do business, currently have significant limitations on the collection, use, storage, transfer and disposal of personal data of consumers and employees, and are considering additional protections that could have an impact on our business, including, for example, the European Union’s 1995 Data Protection Directive and the proposed General Data Protection Regulation.

WeThe ~~post~~foregoing ~~on our Web sites our privacy policies~~ and ~~practices~~other ~~concerning~~existing ~~the~~or ~~use and disclosure of user data. Any failure by us to comply with our posted~~new ~~privacy~~legislation, ~~policies~~laws, ~~Federal~~rules, ~~Trade~~directives, ~~Commission~~guidelines, ~~requirements~~regulations or other ~~privacy-related~~authority ~~laws~~applicable ~~and~~to ~~regulations~~us could ~~result~~expose inus ~~proceedings~~to ~~that~~government ~~could~~investigations ~~potentially~~or ~~harm~~audits, ~~our~~prosecution ~~business,~~for ~~results~~violations of ~~operations~~applicable laws and/or ~~financial~~substantial ~~condition. In this regard~~liability, ~~there are a~~including ~~large~~penalties, ~~number~~damages, ofconsent ~~federal~~decrees, ~~and~~significant ~~state~~attorneys’ ~~legislative~~fees, ~~proposals~~expenses ~~before~~necessary ~~the United States Congress and various state and non-U.S. legislative bodies regarding privacy issues related~~ to ~~our~~comply ~~business.~~with ~~It is not possible to predict whether or when~~ such ~~legislation~~ ~~may~~laws, berules, ~~adopted~~directives, ~~and certain proposals~~guidelines, ~~such~~regulations asor ~~required~~other ~~use~~authority ~~of disclaimers~~ or ~~explicit~~the ~~opt-in~~need ~~mechanisms,~~to ifmodify ~~adopted, could harm~~ our business ~~through a decrease in user registrations and revenues~~practices.

The foregoing and other existing or new legislation, laws, rules, directives, guidelines, regulations or other authority applicable to us could expose us to government investigations or audits, prosecution for violations of applicable laws and/or substantial liability, including penalties, damages, significant attorneys’ fees, expenses necessary to comply with such laws, rules, directives, guidelines, regulations or other authority or the need to modify our business practices.

Available Information

We make available, free of charge, on or through the Investors section of our Web site at www.corporate.americangreetings.com our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and, if applicable, amendments to those reports as soon as reasonably practicable after such material is electronically filed with or furnished to the United States Securities and Exchange Commission (the “SEC”). Such filings are available to the public from the SEC’s Web site at http://www.sec.gov. You may also read and copy any document we file at the SEC’s public reference room in Washington D.C. located at 100 F Street, N.E., Washington D.C. 20549. You may also obtain copies of any document filed by us at prescribed rates by writing to the Public Reference Section of the SEC at that address. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. Our Code of Business Conduct and Ethics is available on or through the Investors section of our Web site at www.corporate.americangreetings.com. Information contained on our Web site shall not be deemed incorporated into, or be part of, this report.

Item 1A.

Risk Factors

You should carefully consider each of the risks and uncertainties we describe below and all other information in this report. The risks and uncertainties we describe below are not the only ones we face. Additional risks and uncertainties of which we are currently unaware or that we currently believe to be immaterial may also adversely affect our business, financial condition, cash flows or results of operations. Additional information on risk factors is included in “Item 1. Business” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report.

There are factors outside of our control that may decrease the demand for our products and services, which may adversely affect our performance.

Our success depends on the sustained demand for our products. Many factors affect the level of consumer spending on our products, including, among other things, general business conditions, interest rates, the availability of consumer credit, taxation, weather, fuel prices and consumer confidence in future economic conditions, all of which are beyond our control. During periods of economic decline, when discretionary income is lower, consumers or potential consumers could delay, reduce or forego their purchases of our products and services, which reduces our sales. A prolonged economic downturn or slow economic recovery may also lead to restructuring actions and associated expenses.

Providing new and compelling products is critical to our future profitability and cash flow.

One of our key business strategies has been to gain profitable market position through product leadership, providing relevant, compelling and superior product offerings. As a result, the need to continuously update and refresh our product offerings is an ongoing, evolving process requiring expenditures and investments that will continue to impact net sales, earnings and cash flows over future periods. At times, the amount and timing of such expenditures and investments depends on the success of a product offering as well as the schedules of our retail partners. We cannot assure you that this strategy will increase either our revenue or profitability. For example, we may not be able to anticipate or respond in a timely manner to changing customer demands and preferences for greeting cards or shifts in consumer shopping behavior. If we misjudge the market, we may significantly sell or overstock unpopular products and be forced to grant significant credits, accept significant returns or write-off a significant amount of inventory, which would have a negative impact on our results of operations and cash flow. Conversely, shortages of popular items could materially and adversely impact our results of operations and financial condition.

We may experience volatility in our cash flow as a result of investments we may make over the next several years.

We have focused and expect to continue to focus our resources on our core greeting card business, developing new, and growing existing business, including by expanding Internet, mobile and other channels of electronic distribution to make American Greetings the natural and preferred social expressions solution, as well as by capturing any shifts in consumer demand. In addition, to the extent we are successful in expanding distribution and revenue in connection with expanding our market leadership, additional capital may be deployed as we may incur incremental costs associated with this expanded distribution, including upfront costs prior to any incremental revenue being generated. If incurred, these costs may be material. We also have been allocating, and expect to continue to allocate over roughly the next several years, resources, including capital, by modernizing our information technology systems, redesigning and deploying new processes, and evolving new organization structures, all of which are intended to drive efficiencies within the business and add new capabilities. The timing of when we spend these amounts may vary from year to year depending on the pacing of the project, but the amounts that we spend could be material in any fiscal year. We currently expect to spend at least an additional ~~approximately~~ $~~190~~195 million, the majority of which we expect will be capital ~~expenditures, over the~~ ~~remaining life of the project~~expenditures. We believe these investments are important to our business, helping us drive further efficiencies and add new capabilities; however, there can be no assurance that we will not spend more or less than $~~190~~195 million ~~over the remaining life of the project,~~ or that we will achieve the anticipated efficiencies or any cost savings.

Consumers shifting to value shopping may negatively impact our profitability.

Over the past several years, consumer shopping patterns have continued to evolve and that shift is impacting us. As consumers have been gradually shifting to value shopping, this shift is resulting in a change in mix of product sold to a higher proportion of value line cards that lowers the average price sold of our greeting cards and has an unfavorable impact on our gross margin percentage. We expect this trend to continue, which will put continued downward pressure on our historical gross margin percentage. Although we believe that we can mitigate some of the impact this trend may have on our ~~operating~~gross margin percentage by continuing to focus on on efficiency and cost reduction within all areas of the Corporation, we cannot assure you that we will be successful or that our gross margin percentage will not decrease.

We rely on a few customers for a significant portion of our sales.

A few of our customers are material to our business and operations. Net sales to our five largest customers, which include mass merchandisers, accounted for approximately 42% of total revenue in 2016, approximately 40% of total revenue in 2015 and approximately 39% of total revenue in ~~each of~~ 2014 ~~and 2013~~. Approximately 58%, ~~58% and 55%~~ of the North American Social Expression Products segment’s revenue in ~~2015,~~each ~~2014~~of ~~and 2013~~2016, ~~respectively,~~2015 and 2014 was attributable to its top five customers. Approximately 5459%, 5054% and 4850% of the International Social Expression Products segment’s revenue in ~~2015~~2016, ~~2014~~2015 and ~~2013~~2014, respectively, excluding sales to the Retail Operations segment, was attributable to its top three customers. Net sales to Wal-Mart Stores, Inc. and its subsidiaries accounted for approximately 1415% of total revenue in ~~2015~~2016, ~~2014~~and approximately 14% of total revenue in 2015 and ~~2013~~2014. Net sales to Target Corporation accounted for approximately 1314% of total revenue in ~~2015~~2016, ~~2014~~and approximately 13% of total revenue in each of 2015 and ~~2013~~2014. There can be no assurance that our large customers will continue to purchase our products in the same quantities that they have in the past. The loss of sales to one of our large customers could materially and adversely affect our business, results of operations, cash flows and financial condition.

Difficulties in integrating acquisitions could adversely affect our business and we may not achieve the cost savings and increased revenues anticipated as a result of these acquisitions.

We continue to regularly evaluate potential acquisition opportunities to support and strengthen our business. We cannot be sure that we will be able to locate suitable acquisition candidates, acquire candidates on acceptable terms or integrate acquired businesses successfully. Future acquisitions could cause us to take on additional compliance obligations as well as ~~experience dilution and~~ incur debt, contingent liabilities, increased interest expense, restructuring charges and amortization expenses related to intangible assets, which may materially and adversely affect our business, results of operations and financial condition.

Integrating future businesses that we may acquire involves significant challenges. In particular, the coordination of geographically dispersed organizations with differences in corporate cultures and management philosophies may increase the difficulties of integration. The integration of these acquired businesses has and will continue to require the dedication of significant management resources, which may temporarily distract management’s attention from our day-to-day operations. The process of integrating operations may also cause an interruption of, or loss of momentum in, the activities of one or more of our businesses and the loss of key personnel. Employee uncertainty and distraction during the integration process may also disrupt our business. Our strategy is, in part, predicated on our ability to realize cost savings and to increase revenues through the acquisition of businesses that add to the breadth and depth of our products and services. Achieving these cost savings and revenue increases is dependent upon a number of factors, many of which are beyond our control. In particular, we may not be able to realize the benefits of anticipated integration of sales forces, asset rationalization, systems integration, and more comprehensive product and service offerings.

If Schurman Fine Papers is unable to operate its retail stores successfully, it could have a material adverse effect on us.

In April, 2009, we sold our then existing North American ~~retail~~Retail ~~operations~~Operations segment, including all 341 of our card and gift retail store assets, to Schurman Fine Papers (“Schurman”), which now operates stores under a number of brands, including the American Greetings, Carlton Cards and Papyrus brands. Although we do not control Schurman, because Schurman is licensing the “Papyrus,” “American Greetings” and “Carlton Cards” names from us for its retail stores, actions taken by Schurman may be seen by the public as actions taken by us, which, in turn, could adversely affect our reputation or brands. In addition, the failure of Schurman to operate its retail stores profitably could have a material adverse effect on us, our reputation and our brands, and could materially and adversely affect our business, financial condition and results of operations, because, under the terms of the transaction:

• we remain subject to certain store leases on a contingent basis through our subleasing of stores to Schurman (as described in Note 13 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report, as of February 28, 2015, Schurman’s aggregate commitments to us under these subleases was approximately $4 million);

could adversely affect our reputation or brands. In addition, the failure of Schurman to operate its retail stores profitably could have a material adverse effect on us, our reputation and our brands, and could materially and adversely affect our business, financial condition and results of operations, because, under the terms of the transaction:

•

we remain subject to certain store leases on a contingent basis through our subleasing of stores to Schurman (as described in Note 1 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report, as of February 29, 2016, Schurman’s aggregate commitments to us under these subleases was approximately $2 million);

•

we are the predominant supplier of greeting cards and other social expression products to the retail stores operated by Schurman; and

•

we have provided credit support to Schurman, including a guaranty of up to $10 million in favor of the lenders under Schurman’s senior revolving credit facility as described in Note 1 to the Consolidated Financial Statements under Part II, Item 8 of this Annual Report.

As a result, if Schurman is unable to operate its retail stores profitably, we may incur significant costs if (1) Schurman is unable to pay for product that it has purchased from us, (2) Schurman is unable to pay rent and other amounts due with respect to the retail store leases that we have subleased to it, or (3) we become obligated under our guaranty of its indebtedness. Accordingly, we may decide in the future to provide Schurman with additional financial or operational support to assist Schurman in successfully operating its stores. Providing such support, however, could result in it being determined that we have a “controlling financial interest” in Schurman under the Financial Accounting Standards Board’s standards pertaining to the consolidation of a variable interest entity. For information regarding the consolidation of variable interest entities, see Note 1 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report. If it is determined that we have a controlling financial interest in Schurman, we will be required to consolidate Schurman’s operations into our results, which could materially affect our reported results of operations and financial position as we would be required to include a portion of Schurman’s income or losses and assets and liabilities into our financial statements.

We may not be successful in operating a direct retail business in a foreign country.

In connection with our June 2012 acquisition of assets from Clinton Cards and certain of its subsidiaries (“Clintons”) out of bankruptcy administration, we acquired approximately 400 retail stores together with related inventory and overhead, as well as the Clinton Cards and related brands. We face a number of challenges in operating a retail business in a foreign country. For example, the specialty retail market in the United Kingdom is extremely competitive with some competitors being larger and more well-established. In addition, we have and continue to face challenges regarding the Clintons brand as a result of the negative perceptions, and loss of consumers, following the bankruptcy administration of Clintons. Additionally, we have been and may continue to be required to make capital and other investments in these stores, which could adversely affect their profitability. There are also many factors outside of our control that could adversely affect our ability to operate the Clintons retail stores profitably, including factors that may affect consumer spending on our products, such as negative consumer perception resulting from a United States company owning the Clintons stores, unfavorable economic conditions in the United Kingdom, availability of consumer credit, taxation levels, adverse weather, high fuel prices and low consumer confidence.

Our business, results of operations and financial condition may be adversely affected by retail consolidations.

With continued retail trade consolidations, we are increasingly dependent upon a reduced number of key retailers whose bargaining strength is growing. We may be negatively affected by changes in the policies of our retail customers, such as inventory de-stocking, limitations on access to display space, SBT and other conditions. Increased consolidations in the retail industry could result in other changes that could damage our business, such as a loss of customers, decreases in volume, less favorable contractual terms and the growth of discount chains. In addition, as the bargaining strength of our retail customers grows, we may be required to grant greater credits, discounts, allowances and other incentive considerations to these customers. We may not be able to recover the costs of these incentives if the customer does not purchase a sufficient amount of products during the term of its agreement with us, which could materially and adversely affect our business, results of operations and financial condition.

Bankruptcy of key customers could give rise to an inability to pay us and increase our exposure to losses from bad debts.

Many of our largest customers are mass merchandiser retailers. The mass merchandiser retail channel has experienced significant shifts in market share among competitors in recent years. In addition, the downturns in the economy and resulting decreasing consumer demand puts pressure on the retail industry in general, as well as specialty retailers specifically, including certain of the card and gift shops that we supply. As a result, retailers may experience liquidity problems and some may be forced to file for bankruptcy protection. There is a risk that certain of our key customers will not pay us, will seek additional credit from us, or that payment may be delayed because of bankruptcy or other factors beyond our control, which could increase our exposure to losses from bad debts and may require us to write-off deferred cost assets. Additionally, our business, results of operations and financial condition could be materially and adversely affected if certain of our larger retail customers were to cease doing business as a result of bankruptcy, or significantly reduce the number of stores they operate.

Bankruptcy of key customers could give rise to an inability to pay us and increase our exposure to losses from bad debts.

We rely on foreign sources of production and face a variety of risks associated with doing business in foreign markets.

We rely on foreign manufacturers and suppliers for various products we distribute to customers. In addition, many of our domestic suppliers purchase a portion of their products from foreign sources. We generally do not have long-term supply contracts with foreign suppliers and some of our imports are subject to existing or potential duties, tariffs or quotas. In addition, a portion of our current operations are conducted and located abroad. The success of our sales to, and operations in, foreign markets depends on numerous factors, many of which are beyond our control, including economic conditions in the foreign countries in which we sell our products. We also face a variety of other risks generally associated with doing business in foreign markets and importing merchandise from abroad, such as:

•

political instability, civil unrest and labor shortages;

•

imposition of new legislation and customs regulations relating to imports that may limit the quantity and/or increase the cost of goods which may be imported into the United States from countries in a particular region;

•

lack of effective product quality control procedures by foreign manufacturers and suppliers;

•

currency and foreign exchange risks; and

•

potential delays or disruptions in transportation as well as potential border delays or disruptions.

Also, new regulatory initiatives may be implemented that have an impact on the trading status of certain countries and may include changes to Mexico’s shelter maquiladora regulations, and the imposition of antidumping and countervailing duties or other trade-related sanctions, which could increase the cost of products or services purchased from suppliers in such countries.

Additionally, as a large, multinational corporation, we are subject to a host of governmental regulations throughout the world, including antitrust and tax requirements, anti-boycott regulations, import/export customs regulations and other international trade regulations, the UK Bribery Act, the USA Patriot Act and the Foreign Corrupt Practices Act. Failure to comply with any such legal requirements could subject us to criminal or monetary liabilities and other sanctions, which could harm our business, results of operations and financial condition.

We have foreign currency translation and transaction risks that may materially and adversely affect our operating results.

The financial position and results of operations of our international subsidiaries are initially recorded in various foreign currencies and then translated into United States dollars at the applicable exchange rate for inclusion in our financial statements. The strengthening of the United States dollar against these foreign currencies ordinarily has a negative impact on our reported sales and operating income (and conversely, the weakening of the United States dollar against these foreign currencies has a positive impact). For the year ended February 28, 2015, foreign currency translation favorably affected revenues by $4.2 million and unfavorably affected income from continuing operations before income taxes by $3.7 million compared to the year ended February 28, 2014. Certain transactions, particularly in foreign locations, are denominated in other than that location’s local currency. Changes in the exchange rates between the two currencies from the original transaction date to the settlement date will result in a currency transaction gain or loss that directly impacts our reported earnings. For the year ended February 28, 2015, the impact of currency movements on these transactions unfavorably affected non-operating income by $1.5 million. The volatility of currency exchange rates may materially and adversely affect our results of operations.

The social expressions industry is extremely competitive, and our business, results of operations and financial condition will suffer if we are unable to compete effectively.

The market for social expressions products is large, evolving and intensely competitive, and we expect competition to increase in the future with the rapidly growing use by consumers of electronic devices and the Internet to express themselves and to communicate with others. We compete with the growing number of media by which consumers express themselves and connect with others, whether by way of traditional tangible greeting cards purchased at retail stores; tangible greeting cards that incorporate personalized messages and/or images purchased at retail stores, over the Internet or using mobile devices; electronic greeting cards delivered over the Internet or using mobile devices; or social media companies that host and enable mobile access to and posting of greetings and images. We face intense competition from a wide range of companies, ranging from small, family-run organizations to major corporations. Many of the companies with which we compete may have substantially greater financial, technical or marketing resources, a greater customer base, stronger name recognition and a lower cost of funds than we do. Certain of these competitors may also have longstanding relationships with certain large customers to which they may offer products that we do not provide, putting us at a competitive disadvantage. As a result, our competitors may be able to:

We have foreign currency translation and transaction risks that may materially and adversely affect our operating results.

The financial position and results of operations of our international subsidiaries are initially recorded in various foreign currencies and then translated into United States dollars at the applicable exchange rate for inclusion in our financial statements. The strengthening of the United States dollar against these foreign currencies ordinarily has a negative impact on our reported sales and operating income (and conversely, the weakening of the United States dollar against these foreign currencies has a positive impact). For the year ended February 29, 2016, foreign currency translation unfavorably affected revenues by $59.0 million and unfavorably affected income from continuing operations before income taxes by $2.5 million compared to the year ended February 28, 2015. Certain transactions, particularly in foreign locations, are denominated in other than that location’s local currency. Changes in the exchange rates between the two currencies from the original transaction date to the settlement date will result in a currency transaction gain or loss that directly impacts our reported earnings. For the year ended February 29, 2016, the impact of currency movements on these transactions unfavorably affected non-operating income by $1.8 million. The volatility of currency exchange rates may materially and adversely affect our results of operations.

The social expression industry is extremely competitive, and our business, results of operations and financial condition will suffer if we are unable to compete effectively.

The market for social expression products is large, evolving and intensely competitive, and we expect competition to increase in the future with the rapidly growing use by consumers of electronic devices and the Internet to express themselves and to communicate with others. We compete with the growing number of media by which consumers express themselves and connect with others, whether by way of traditional tangible greeting cards purchased at retail stores; tangible greeting cards that incorporate personalized messages and/or images purchased at retail stores, over the Internet or using mobile devices; electronic greeting cards delivered over the Internet or using mobile devices; or social media companies that host and enable mobile access to and posting of greetings and images. We face intense competition from a wide range of companies, ranging from small, family-run organizations to major corporations. Many of the companies with which we compete may have substantially greater financial, technical or marketing resources, a greater customer base, stronger brand or name recognition and a lower cost of funds than we do. Certain of these competitors may also have longstanding relationships with certain large customers to which they may offer products that we do not provide, putting us at a competitive disadvantage. As a result, our competitors may be able to:

•

adapt to changes in customer requirements or consumer preferences more quickly;

•

take advantage of acquisitions and other opportunities more readily;

•

devote greater resources to the marketing and sale of their products, including sales directly to consumers through the Internet; and

•

adopt more aggressive pricing policies.

There can be no assurance that we will be able to continue to compete successfully in this market or against such competition. If we are unable to introduce new and innovative products that are attractive to our customers and ultimate consumers, or if we are unable to allocate sufficient resources to effectively market and advertise our products to achieve widespread market acceptance, we may not be able to compete effectively, our sales may be adversely affected, we may be required to take certain financial charges, including ~~goodwill~~asset impairments, and our results of operations and financial condition could otherwise be adversely affected.

We are subject to a number of restrictive covenants under our borrowing arrangements, which could affect our flexibility to fund ongoing operations, uses of capital and strategic initiatives, and, if we are unable to maintain compliance with such covenants, it could lead to significant challenges in meeting our liquidity requirements.

The terms of our borrowing arrangements contain a number of restrictive covenants, including customary operating restrictions that limit our ability to engage in such activities as borrowing and making investments, capital expenditures and distributions on our capital stock, and engaging in mergers, acquisitions and asset sales. We are also subject to customary financial covenants, including a leverage ratio and an interest coverage ratio. These covenants restrict the amount of our borrowings, reducing our flexibility to fund ongoing operations and strategic ~~initiatives. These borrowing~~ arrangements are described in more detail in “Liquidity and Capital Resources” under Item 7 and in Note 11 to the Consolidated Financial Statements under Part II, Item 8 of this Annual Report. Compliance with some of these covenants is based on financial measures derived from our operating results. If economic conditions deteriorate, we may experience material adverse impacts to our business and operating results, such as through reduced customer demand and inflation. A decline in our business could make us unable to maintain compliance with these financial covenants, in which case we may be restricted in how we manage our business and deploy capital, including by limiting our ability to make acquisitions and dispositions and pay dividends. In addition, if we are unable to maintain compliance with our financial covenants or otherwise breach the covenants that we are subject to under our borrowing arrangements, our lenders could demand immediate payment of amounts outstanding and we would need to seek alternate financing sources to pay off such debts and to fund our ongoing operations. Such financing may not be available on favorable terms, if at all. In addition, our credit agreement is secured by substantially all of our domestic assets, including the stock of certain of our subsidiaries. If we cannot repay all amounts that we have borrowed under our credit agreement, our lenders could proceed against our assets.

Pending litigation could have a material, adverse effect on our business, financial condition, liquidity, results of operations and cash flows.

As described in “Item 3. Legal Proceedings” of this Annual Report, from time to time we are engaged in lawsuits which may require significant management time and attention and legal expense, and may result in an unfavorable outcome, which could have a material, adverse effect on our business, financial condition, liquidity, results of operations and cash flows. Any estimates of loss regarding pending litigation disclosed from time to time would be based on information that is then available to us and may not reflect any particular final outcome. The results of rulings, judgments or settlements of such litigation may result in financial liability that is materially higher than what management estimated at the time. We make no assurances that we will not be subject to liability with respect to current or future litigation. We maintain various forms of insurance coverage. However, substantial rulings, judgments or settlements could exceed the amount of insurance coverage or could be excluded under the terms of an existing insurance policy.

We initiatives. ~~have~~These ~~been~~borrowing arrangements are described in more detail in “Liquidity and ~~may~~Capital Resources” under Part II, Item 7 and in ~~the~~Note ~~future~~11 beto the ~~subject~~Consolidated Financial Statements under Part II, Item 8 of ~~actions~~this byAnnual ~~third~~Report. ~~parties~~Compliance ~~alleging~~with ~~infringement~~some of these covenants is based on financial measures derived from our operating results. If economic conditions deteriorate, we may experience material adverse impacts to ~~proprietary~~our ~~rights~~business and operating results, ~~especially~~such as through reduced customer demand and inflation. A decline in our business could make us unable to maintain compliance with ~~respect~~these financial covenants, in which case we may be restricted in how we manage our business and deploy capital, including by limiting our ability to make acquisitions and dispositions and pay dividends. In addition, if we are unable to maintain compliance with our ~~Internet~~financial covenants or otherwise breach the covenants that we are subject to under our borrowing arrangements, our lenders could demand immediate payment of amounts outstanding and ~~wireless~~we ~~businesses~~would need to seek alternate financing sources to pay off such debts and to fund our ongoing operations. Such financing may not be available on favorable terms, if at all. In addition, our credit agreement is secured by substantially all of our domestic assets, including the stock of certain of our subsidiaries. If we cannot repay all amounts that we have borrowed under our credit agreement, our lenders could proceed against our assets.

WePending ~~may~~litigation becould ~~involved~~have ina ~~various~~material, ~~legal~~adverse ~~matters~~effect ~~arising~~on ~~from~~our ~~the normal course of~~ business ~~activities. These include claims~~, ~~suits and other proceedings involving alleged infringement of third-party patents and other intellectual property rights. In particular~~financial condition, ~~the industry in which our Internet and wireless businesses operate is characterized by the existence of a large number of patents~~liquidity, ~~trademarks~~results ~~and copyrights and by frequent litigation based on allegations~~ of ~~infringement~~operations ~~or other violations of intellectual property rights. We have received in the past~~ and ~~may~~cash ~~receive in the future communications from third parties, including practicing entities and non-practicing entities, claiming that we have infringed their intellectual property rights~~flows.

We have been and may in the future be the subject of actions by third parties alleging infringement of proprietary rights, especially with respect to our Internet and mobile businesses.

We may be involved in various legal matters arising from the normal course of business activities. These include claims, suits and other proceedings involving alleged infringement of third-party patents and other intellectual property rights. In particular, the industry in which our Internet and mobile businesses operate is characterized by the existence of a large number of patents, trademarks and copyrights and by frequent litigation based on allegations of infringement or other violations of intellectual property rights. We have received in the past and may receive in the future communications from third parties, including practicing entities and non-practicing entities, claiming that we have infringed their intellectual property rights.

Changes in federal, state and local or foreign tax law and interpretations of existing tax law could increase our tax burden or otherwise adversely affect our financial condition or results of operations.

We are subject to taxation at the federal, state or provincial and local levels in the U.S. and various other countries and jurisdictions. Our future effective tax rate could be affected by changes in the composition of earnings in jurisdictions with differing tax rates, changes in statutory rates and other legislative changes, including those that may result from the Base Erosion Profit Shifting, or BEPS, initiative being conducted by the Organization for Economic Cooperation and Development. Additionally, changes in determinations regarding the jurisdictions in which we are subject to tax or the amount of income allocated to such jurisdictions could negatively impact our effective tax rate. Furthermore, from time to time, the U.S. federal, state and local and foreign governments make substantive changes to tax rules and their application, which could result in materially higher corporate taxes than would be incurred under existing tax law and could adversely affect our financial condition or results of operations.

The amount of various taxes we pay is subject to ongoing compliance requirements and audits by federal, state and foreign tax authorities.

Our estimate of the potential outcome of uncertain tax issues is subject to our assessment of relevant risks, facts and circumstances existing at the time. We use these assessments to determine the adequacy of our provision for income taxes and other tax-related accounts. Our future results may include favorable or unfavorable adjustments to our estimated tax liabilities in the period the assessments are made or resolved, which may impact our effective tax rate and/or our financial results.

taxes and other tax-related accounts. Our future results may include favorable or unfavorable adjustments to our estimated tax liabilities in the period the assessments are made or resolved, which may impact our effective tax rate and/or our financial results.

We have deferred tax assets that we may not be able to use under certain circumstances.

If we are unable to generate sufficient future taxable income in certain jurisdictions, or if there is a significant change in the time period within which the underlying temporary differences become taxable or deductible, we could be required to increase our valuation allowances against our deferred tax assets. This would result in an increase in our effective tax rate and would have an adverse effect on our future operating results. In addition, changes in statutory tax rates may change our deferred tax asset or liability balances, with either favorable or unfavorable impacts on our effective tax rate. Our deferred tax assets may also be impacted by new legislation or regulation.

We may not be able to acquire or maintain advantageous content licenses from third parties to produce products.

To provide an assortment of relevant, compelling and superior product offerings, an important part of our business involves obtaining licenses to produce products based on various popular brands, celebrities, character properties, designs, ~~content~~copy, music and other material owned by third parties. In the event that we are not able to acquire or ~~maintain~~ maintain advantageous licenses, we may not be able to meet changing customer demands and preferences for greeting cards and our other products, which could materially and adversely affect our business, results of operations and financial condition.

We may not realize the full benefit of the material we license from third parties if the licensed material has less market appeal than expected or if sales revenue from the licensed products is not sufficient to earn out the minimum guaranteed royalties.

The agreements under which we license popular brands, celebrities, character properties, design, ~~content~~copy, music and other material owned by third parties usually require that we pay an advance and/or provide a minimum royalty guarantee that may be substantial. In some cases, these advances or or minimums may be greater than what we will be able to recoup in profits from actual sales, which could result in write-offs of such amounts that would adversely affect our results of operations. In addition, we may acquire or renew licenses ~~requiring~~ requiring minimum guarantee payments that may result in us paying higher effective royalties, if the overall benefit of obtaining the license outweighs the risk of potentially losing, not renewing or otherwise not obtaining a valuable license. When ~~obtaining~~ obtaining a license, we realize there is no guarantee that a particular licensed property will make a successful greeting card or other product in the eye of the ultimate consumer. Furthermore, there can be no assurance that a successful licensed ~~property~~ property will continue to be successful or maintain a high level of sales in the future.

Our inability to protect or defend our intellectual property rights could reduce the value of our products and brands.

We believe that our trademarks, copyrights, trade secrets, patents and other ~~intellectual~~ intellectual property rights are important to our brands, success and competitive position. We rely on trademark, copyright, trade secrets and patent laws in the United States and similar laws in other jurisdictions and on confidentiality and other types of agreements with some employees, vendors, consultants and others to protect our intellectual property rights. Despite these measures, if we are unable to successfully file for, register or otherwise protect and enforce our rights or if these rights are infringed, invalidated, challenged, circumvented or misappropriated, our business could be materially and adversely affected. Also, we are, and may in the future be, subject to intellectual property rights claims in the United States or ~~foreign~~ foreign countries, which could limit our ability to use certain intellectual property, products or brands in the future. Defending any such claims, even claims without merit, could be time-consuming, result in costly settlements, litigation or ~~restrictions~~ restrictions on our business and could damage our reputation.

Rapidly changing trends in the children’s entertainment market could adversely affect our business.

A portion of our business and results of operations depends upon the appeal of our licensed character properties, which are used to create various toy and entertainment items for children. Consumer preferences, particularly among children, are continuously changing. The children’s entertainment industry experiences significant, sudden and often ~~unpredictable shifts in demand caused by~~ changes in the preferences of children to more “on trend” entertainment properties. Moreover, the life cycle for individual youth entertainment products tends to be short. Therefore, our ability to maintain our current market position and grow our business in the future depends on our ability to satisfy consumer preferences by enhancing existing entertainment properties and developing new entertainment properties. If we are not able to meet these challenges successfully in a timely and cost-effective manner, demand for our collection of entertainment properties could decrease and our business, results of operations and financial condition may be materially and adversely affected. In addition, we may incur significant costs developing entertainment properties that may not generate future revenues at the levels that we anticipated, which could in turn create fluctuations in our reported results based on when those costs are expensed and could otherwise materially and adversely affect our results of operations and financial condition.

unpredictable shifts in demand caused by changes in the preferences of children to more “on trend” entertainment properties. Moreover, the life cycle for individual youth entertainment products tends to be short. Therefore, our ability to maintain our current market position and grow our business in the future depends on our ability to satisfy consumer preferences by enhancing existing entertainment properties and developing new entertainment properties. If we are not able to meet these challenges successfully in a timely and cost-effective manner, demand for our collection of entertainment properties could decrease and our business, results of operations and financial condition may be materially and adversely affected. In addition, we may incur significant costs developing entertainment properties that may not generate future revenues at the levels that we anticipated, which could in turn create fluctuations in our reported results based on when those costs are expensed and could otherwise materially and adversely affect our results of operations and financial condition.

Our results of operations fluctuate on a seasonal basis.

The social expression industry is a seasonal business, with sales generally being higher in the second half of our fiscal year due to the concentration of major holidays during that period. Consequently, our overall results of operations in the future may fluctuate substantially based on seasonal demand for our products. Such variations in demand could have a material adverse effect on the timing of cash flow and therefore our ability to meet our obligations with respect to our debt and other financial commitments. Seasonal fluctuations also affect our inventory levels, because we usually order and manufacture merchandise in advance of peak selling periods and sometimes before new trends are confirmed by customer orders or consumer purchases. We must carry significant amounts of inventory, especially before the holiday season selling period. If we are not successful in selling the inventory during the holiday period, we may have to sell the inventory at significantly reduced prices, or we may not be able to sell the inventory at all.

Our results of operations will not include results from businesses that we recently sold.

During fiscal 2015 we sold our fixtures business and in the first quarter of fiscal 2016 we sold our Strawberry Shortcake property. During fiscal 2014, our fixtures business contributed revenue and operating income to our ~~consolidate~~consolidated results of approximately $49.4 million and $17.4 million, respectively. During fiscal 2015, our Strawberry Shortcake property contributed royalty revenue to our consolidated results of approximately $14.76 million. As a result, our future results of operations will be lower than prior periods unless we are able to replace the revenue and operating income associated with these businesses through our remaining business operations, by means of future acquisitions or otherwise.

Increases in raw material and energy costs, and the consolidation of raw material suppliers and critical service providers, may materially raise our costs and materially impact our profitability.

Paper is a significant expense in the production of our greeting cards. Significant increases in paper prices, ~~which have been volatile in past years,~~ or increased costs of other raw materials or energy, such as fuel, may result in declining margins and operating results if market conditions prevent us from passing these increased costs on to our customers through timely price increases on our greeting cards and other social expression products. In addition, the growing consolidation in the paper industry and small package freight industry is expected to reduce our negotiating position with such suppliers, which may make obtaining competitive terms more difficult.

The loss of key members of our senior management and creative teams could adversely affect our business.

Our success and continued growth depend largely on the efforts and abilities of our current senior management team as well as upon a number of key members of our creative staff, who have been instrumental in our success thus far, and upon our ability to attract and retain other highly capable and creative individuals. The loss of some of our senior executives or key members of our creative staff, or an inability to attract or retain other key individuals, could materially and adversely affect us. We seek to compensate our key executives, as well as other employees, through competitive salaries, bonus plans or other incentives, but we can make no assurance that these programs will enable us to retain key employees or hire new employees.

1314

If we fail to extend or renegotiate our primary collective bargaining contracts with our labor unions as they expire from time to time, or if our unionized employees were to engage in a strike, or other work stoppage, our business and results of operations could be materially adversely affected.

We are party to collective bargaining contracts with our labor unions, which represent a large number of our employees. In particular, approximately ~~700~~725 of our employees are unionized and are covered by collective bargaining agreements. Although we believe our relations with our employees are satisfactory, no assurance can be given that we will be able to successfully extend or renegotiate our collective bargaining agreements as they expire from time to time. If we fail to extend or renegotiate our collective bargaining agreements, if disputes with our unions arise, or if our unionized workers engage in a strike or other work -related stoppage, we could incur higher ongoing labor costs or experience a significant disruption of operations, which could have a material adverse effect on our business.

Employee benefit costs constitute a significant element of our annual expenses and funding these costs could adversely affect our financial condition.

Employee benefit costs are a significant element of our cost structure. Certain expenses, particularly healthcare costs, may increase significantly at a rate that is difficult to forecast and may adversely affect our results of operations, financial condition or cash flows. In addition, federal healthcare legislation may increase our employer-sponsored medical plan costs, some of which increases could be significant. Declines in global capital markets may cause reductions in the value of our pension plan assets. Such circumstances could have an adverse effect on future pension expense and funding requirements. Further information regarding our retirement benefits is presented in Note 12 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report.

Various environmental regulations and risks applicable to a manufacturer and/or distributor of consumer products may require us to take actions, which will adversely affect our results of operations.

Our business is subject to numerous federal, state, provincial, local and foreign laws and regulations, including regulations with respect to chemical usage, air emissions, wastewater and storm water discharges and other releases into the environment as well as the generation, handling, storage, transportation, treatment and disposal of waste materials, including hazardous materials. Although we believe that we are in substantial compliance with all applicable laws and regulations, because legal requirements frequently change and are subject to interpretation, these laws and regulations may give rise to claims, uncertainties or possible loss contingencies for future environmental remediation liabilities for which we are unable to predict the ultimate cost, which may be significant, or the effect on our operations. We have implemented various programs designed to protect the environment and comply with applicable environmental laws and regulations. The costs associated with these compliance and remediation efforts have not had and are not expected to have a material adverse effect on our financial condition, cash flows or operating results. We cannot be certain that existing laws or regulations, as currently interpreted or reinterpreted in the future, or future laws or regulations, will not have a material and adverse effect on our business, results of operations and financial condition. The impact of increasingly stringent environmental laws and regulations, regulatory enforcement activities, the discovery of unknown conditions, and ~~third~~ third-party claims for damages to the environment, real property or persons could result in additional liabilities and costs in the future. Additionally, some state governments (for instance Washington, California, Minnesota, Maine and ~~Vermont~~Oregon) are increasingly introducing legislation to require consumer product manufacturers to ~~annually~~ report whether their products contain certain chemicals and/or to ban products containing certain chemicals which the state has determined to be of concern to the health and safety of its residents. Several of the chemicals already subject to such regulation are contained in our products and we believe we are in substantial compliance with current applicable state regulations, but we are unable to predict how many other states will implement such legislation, whether it will apply to our products, and the testing and administrative costs of compliance.

We may be subject to product liability claims and our products could be subject to voluntary or involuntary recalls and other actions.

We are subject to numerous federal, state, provincial and foreign laws and regulations governing product safety including, but not limited to, those regulations enforced by the U.S. Consumer Product Safety Commission, Health Canada, UK local authority trading standards departments, UK Health and Safety Executive, and Australia’s Consumer Affairs unit of the Department of Justice. A failure to comply with such laws and regulations, or concerns about product safety may lead to a recall of selected products. We have experienced, and in the future may experience, recalls and defects or errors in products after their production and sale to customers. Such recalls and defects or errors could result in the rejection of our products by our retail customers and consumers, damage to our reputation, lost sales, diverted development resources and increased customer service and support costs, any of which could harm our business. Individuals could sustain injuries from our products and we may be subject to claims or lawsuits resulting from such injuries. Governmental agencies could pursue us and issue civil fines and/or criminal penalties for a failure to comply with product safety regulations. There is a risk that these claims or liabilities may exceed, or fall outside the scope of, our insurance coverage. Additionally, we may be unable to obtain adequate liability insurance in the future. Recalls, post-manufacture repairs of our products, product liability claims, absence or cost of insurance and administrative costs associated with recalls could harm our reputation, increase costs or reduce sales.

1415

concerns about product safety may lead to a recall of selected products. We have experienced, and in the future may experience, recalls and defects or errors in products after their production and sale to customers. Such recalls and defects or errors could result in the rejection of our products by our retail customers and consumers, damage to our reputation, lost sales, diverted development resources and increased customer service and support costs, any of which could harm our business. Individuals could sustain injuries from our products and we may be subject to claims or lawsuits resulting from such injuries. Governmental agencies could pursue us and issue civil fines and/or criminal penalties for a failure to comply with product safety regulations. There is a risk that these claims or liabilities may exceed, or fall outside the scope of, our insurance coverage. Additionally, we may be unable to obtain adequate liability insurance in the future. Recalls, post-manufacture repairs of our products, product liability claims, absence or cost of insurance and administrative costs associated with recalls could harm our reputation, increase costs or reduce sales.

Government regulation of the Internet, e-commerce and cellular communications is evolving, and unfavorable changes or failure by us to comply with these regulations could harm our business and results of operations.

We are subject to general business regulations and laws as well as regulations and laws specifically governing the Internet, e-commerce and cellular communications. Existing and future laws and regulations may impede the growth of the Internet or other online and cellular services. These regulations and laws may cover taxation, restrictions on imports and exports, customs, tariffs, user privacy, data protection, pricing, content, copyrights, distribution, electronic contracts and other communications, consumer protection, the provision of online payment services, broadband residential Internet access and the characteristics and quality of products and services. It is not clear how existing laws governing issues such as property use and ownership, sales and other taxes, fraud, libel and personal privacy apply to the Internet, e-commerce and cellular technology as the vast majority of these laws were adopted prior to the advent of the Internet and/or text messaging and do not contemplate or address the unique issues raised by the Internet, e-commerce and/or text messaging. Those laws that do reference the Internet and/or text messaging are only beginning to be interpreted by the courts and their applicability and reach are therefore uncertain. For example, the ~~Digital~~ ~~Millennium Copyright Act, or~~ DMCA, is intended, in part, to limit the liability of eligible online service providers for including (or for listing or linking to third-party Web sites that include) materials that infringe copyrights or other rights of others. Portions of the ~~Communications Decency Act, or~~ CDA, are intended to provide statutory protections to online service providers who distribute unrelated third-party content. We rely on the protections provided by both the DMCA and CDA in conducting our online business. Any changes in these laws or judicial interpretations narrowing their protections will subject us to greater risk of liability and may increase our costs of compliance with these regulations or limit our ability to operate certain lines of business. The Video Privacy Protection Act and the Children’s Online Privacy Protection Act isare intended to impose additional restrictions on the ability of online service providers to disclose personally identifiable information about a consumer or collect user information from minors, respectively. The ~~Federal~~FTC ~~Trade Commission~~ Act~~, Title~~ ~~5 – Unfair & Deceptive Acts & Practices~~ prohibits businesses from engaging in unfair or deceptive acts or practices, including by misrepresenting data privacy ~~and security~~practices. The ~~Protection~~TCPA restricts the making of ~~Children~~calls, ~~From~~faxes ~~Sexual~~and texts by an autodialer unless proper ~~Predators~~consent ~~Act~~is ofobtained ~~1998~~or ~~requires~~appropriate ~~online~~disclosures ~~service~~are ~~providers~~made. In addition, any failure or perceived failure by us to ~~report~~comply ~~evidence~~with ofour ~~violations~~privacy ofpolicies ~~federal~~or ~~child~~privacy-related ~~pornography~~obligations ~~laws~~to ~~under~~customers ~~certain~~or ~~circumstances.~~other ~~The~~third ~~Telephone~~parties ~~Consumer~~may ~~Protection~~result ~~Act~~in offederal ~~1991~~or ~~restricts~~state governmental ~~telephone~~enforcement ~~solicitations~~actions, litigation, or negative public attention and ~~expressly prohibits~~could ~~autodialed~~cause ~~calls~~our customers to ~~cellular~~lose ~~phones~~trust ~~without~~in ~~written~~us, ~~consent.~~which Incould ~~addition,~~have ~~many~~an adverse effect on our reputation and business. Many foreign jurisdictions, including those in which we do business, currently have significant limitations on the collection, use, storage, transfer and disposal of personal data of consumers and employees, and are considering the European Union’s 1995 Data Protection Directive. The costs of compliance with these regulations may increase in the future as a result of changes in the regulations or the interpretation of them. Further, any failures on our part to comply with these regulations may subject us to significant liabilities. Those current and future laws and regulations or unfavorable resolution of these issues may substantially harm our business and results of operations.

Failure to protect ~~confidential~~ information of our ~~customers~~user and employee base and our network against security breaches or failure to comply with ~~privacy and~~ security laws and regulations could damage our reputation and brands and substantially harm our business and results of operations.

An important component of our business involves the receipt and storage of information about our consumers, customers, employees and vendors. A significant challenge to e-commerce and communications is the secure transmission of ~~confidential~~ information over public networks. Our failure to monitor, protect and prevent security breaches could damage our reputation and brands and harm our business and results of operations. In transactions conducted over the Internet, maintaining complete security for the transmission of confidential information on our Web sites, such as customers’ credit card numbers and expiration dates, personal information and billing addresses, is essential to maintain consumer confidence. We have limited influence over the security measures of third-party online payment service providers. In addition, we hold certain private information about our customers, such as their names, addresses, phone numbers and purchasing records.

~~We may~~16 not be able to prevent third parties from stealing information provided by our customers to us through our Web sites. In addition, anyone who is able to circumvent our security measures could misappropriate proprietary information or cause interruptions in our operations. Any compromise of our security could damage our reputation and brands and expose us to a risk of loss or litigation and possible liability, which could substantially harm our business and results of operations. In addition, we may need to devote significant resources to protect against security breaches or to address problems caused by breaches.

~~Even~~ over ifthe weInternet, ~~are~~maintaining ~~successful~~security infor ~~adapting~~the transmission of information on our Web sites is essential to maintain consumer confidence and ~~preventing~~brand ~~new~~reputation. ~~security~~However, ~~breaches~~because the techniques used to obtain unauthorized access, ~~any~~disable ~~perception~~or bydegrade ~~the~~service, ~~public~~or ~~that e-commerce~~sabotage systems change frequently and ~~other~~may ~~online~~be ~~transactions~~difficult to detect for long periods of time, we may be unable to anticipate these techniques or ~~the~~implement ~~privacy~~adequate ofpreventive ~~user~~measures. In ~~information~~addition, ~~are~~hardware, ~~becoming~~software, ~~increasingly~~or ~~unsafe~~applications we develop or ~~vulnerable~~procure tofrom ~~attack~~third parties may contain defects in design or manufacture or other problems that could ~~inhibit~~unexpectedly ~~the~~compromise ~~growth~~information security. Unauthorized parties may also attempt to gain access to our systems or facilities, or those of third parties with whom we do business, through fraud, trickery or other forms of deceiving our ~~businesses~~employees, contractors and temporary staff.

InAny ~~addition,~~compromise ~~any~~of ~~failure~~our orsecurity ~~perceived~~could ~~failure~~expose by us to ~~comply~~a ~~with~~risk ~~our~~of ~~privacy~~loss ~~policies~~ or ~~privacy-related~~litigation ~~obligations~~and topossible ~~customers~~liability, orwhich ~~other~~could ~~third~~substantially ~~parties~~harm ~~may result~~our inbusiness ~~Federal~~and orresults of ~~state~~operations. ~~governmental~~In ~~enforcement actions~~addition, ~~litigation,~~we ormay ~~negative~~need ~~public~~to ~~attention~~devote ~~and~~significant ~~could~~resources ~~cause our customers~~ to ~~lose~~protect ~~trust~~against insecurity ~~us,~~breaches ~~which~~or ~~could~~to ~~have~~address anproblems ~~adverse~~caused ~~effect~~by ~~on our reputation and business~~breaches.

Information technology infrastructure failures could significantly affect our business.

We depend heavily on our information technology infrastructure in order to achieve our business objectives. Portions of our information technology infrastructure are old and difficult to maintain. We could experience a problem that impairs this infrastructure, such as a computer virus, a problem with the functioning of an important information technology application, or an intentional disruption of our information technology systems. In addition, our information technology systems could suffer damage or interruption from human error, fire, flood, power loss, telecommunications failure, break-ins, terrorist attacks, acts of war and similar events. The disruptions caused by any such events could impede our ability to record or process orders, manufacture and ship in a timely manner, properly store ~~consumer~~ images, or otherwise carry on our business in the ordinary course. Any such event could impact our ability to create, design or manufacture product, cause us to lose customers or revenue, damage our reputation, and could require us to incur significant expense to eliminate these problems and address related security concerns.

Continuing over the next several years, we expect to allocate resources, including capital, to refresh our information technology systems by modernizing our systems, redesigning and deploying new processes, and evolving new organization structures, all of which are intended to drive efficiencies within the business and add new capabilities. Such an implementation is expensive and carries ~~substantial~~ substantial operational risk, including loss of data or information, unanticipated increases in costs, disruption of operations orand business interruption. Further, we may not be successful implementing new systems or any new system may not perform as expected. This could have a material adverse effect on our business.

The project to relocate our world headquarters could result in cost overruns and disruptions to our operations.

Our project to construct and relocate to a new world headquarters was put on hold in connection with the Going Private Proposal. When the Merger closed, we resumed the project. The gross costs associated with the new world headquarters building, before any tax credits, loans or other incentives, are expected to be between approximately $150 million and $200 million. Although the majority of the cost of construction of the new world headquarters is expected to be financed through the Corporation’s affiliate, H L & L Property Company (“H L & L”), due to the inherent difficulty in estimating costs associated with projects of this scale and nature, the costs associated with this project may be higher than expected and we may have to dedicate additional funds to the project, including providing additional funds to H L & L or its direct or indirect parents. Furthermore, we may be unable to benefit from all of the state and local incentives made available to assist in the development of the new world headquarters if we are unable to satisfy the requirements that we must meet to receive the benefits. For example, certain of the incentives offered require us to maintain certain employment and payroll thresholds. If we are unable to satisfy these requirements, the benefits are subject to partial, and in ~~some~~ some instances complete, reduction. In addition, the process of moving our world headquarters is inherently complex and not part of our day -to -day operations. Thus, that process could cause significant disruption to our operations and cause the ~~temporary~~ temporary diversion of management resources, all of which could have a material adverse effect on our business.

Acts of nature could result in an increase in the cost of raw materials; other catastrophic events, including earthquakes, could interrupt critical functions and otherwise adversely affect our business and results of operations.

Acts of nature could result in an increase in the cost of raw materials or a shortage of raw materials, which could influence the cost of goods supplied to us. Additionally, we have significant operations, including our largest manufacturing facility, near a major earthquake fault line in Arkansas. A catastrophic event, such as an earthquake, fire, tornado, or other natural or man-made disaster, could disrupt our operations and impair production or distribution of our products, damage inventory, interrupt critical functions or otherwise affect our business negatively, harming our results of operations.

We are indirectly owned and controlled by members of the Weiss family, and their interests as equity holders may conflict with the interest of holders of American Greetings’ debt.

We are indirectly owned and controlled by the Weiss family, some of whom are executive officers and directors of American Greetings and its subsidiaries, and who have the ability to control our policy and operations. The interests of the members of the Weiss family may not in all cases be aligned with interests of the holders of our debt. For example, if we encounter financial difficulties or are unable to pay our debts as they mature, the interests of the members of the Weiss family might conflict with the interests of holders of our debt. In addition, members of the Weiss family may have an interest in pursuing acquisitions, divestitures, financing or other transactions that, in their judgment, could enhance their equity investments, even though such transactions might involve heightened risks to holders of our debt.

Item 1B.

Unresolved Staff Comments

None.

Item 2. Properties

As of February 28, 2015, we owned or leased approximately 7.8 million square feet of plant, warehouse and office space throughout the world, of which approximately 1.4 million square feet is leased space. We believe our manufacturing and distribution facilities are well maintained and are suitable and adequate, and have sufficient productive capacity to meet our current needs.

The following table summarizes, as of February 28, 2015, our principal plants and materially important physical properties and identifies as of such date the respective segments that use the properties described. In addition to the following, as of February 28, 2015, we also operated 412 card and gift retail stores throughout the United Kingdom, all of which were operated in premises that we leased from third parties. Although we sold our then existing North American retail operations segment in April 2009, in addition to the following, we remain subject to certain of the store leases on a contingent basis through our subleasing of stores to Schurman, which operates these retail stores throughout North America. See Note 13 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report.

* —Indicates calendar year

Approximate Square FeetOccupied

ExpirationDate ofMaterialLeases*

Location

Owned

Leased

Principal Activity

Cleveland, (1) (3) (5) Ohio

1,194,414

)

World Headquarters: General offices of North American Greeting Card Division; Plus Mark LLC; AG Interactive, Inc.; Cardstore, Inc.; AGC, LLC; Those Characters From Cleveland, Inc.; and Cloudco, Inc.; creation and design of greeting cards, gift packaging, party goods, stationery and giftware; marketing of electronic greetings; design licensing; character licensing

Bardstown, (1) Kentucky

413,500

Cutting, folding, finishing and packaging of greeting cards

Danville, (1) Kentucky

1,374,000

Distribution of everyday products including greeting cards

Osceola, (1) Arkansas

2,552,000

Cutting, folding, finishing and packaging of greeting cards and warehousing; distribution of seasonal products

Ripley, (1) Tennessee

165,000

Greeting card printing (lithography)

Approximate SquareFeet Occupied

ExpirationDate ofMaterialLeases*

Location

Owned

Leased

Principal Activity

Greeneville, (1) Tennessee

1,044,000

Printing and packaging of seasonal greeting cards and wrapping items and order filling and shipping for Plus Mark LLC

Chicago, (1) Illinois

45,000

2018

Administrative offices of Papyrus-Recycled Greetings, Inc.

Fairfield, (1) California

10,700

2015

General offices of Papyrus-Recycled Greetings, Inc.

Mississauga, (1) Ontario, Canada

38,000

2018

General offices of Carlton Cards Limited and Papyrus-Recycled Greetings Canada Ltd.

Mulgrave, (2) Australia

30,000

2021

General offices of John Sands companies

Dewsbury, (2) England

430,000

General offices of UK Greetings Ltd. and manufacture and distribution of greeting cards and related products

Bretton Park,(2) England

205,000

Warehouse and distribution center – Dewsbury

Corby, England (2)

136,000

Distribution of greeting cards and related products

Warehouse (2) Princewood Road, England

25,000

2018

Offices – Corby

Warehouse (2) Manton Road, England

65,000

2015

Warehouse and distribution – Corby

London, England(4)

25,560

2024

General offices of Clinton Cards

1 North American Social Expression Products

2 International Social Expression Products

3 AG Interactive

4 Retail Operations

5 Non-reportable

6 Expiration date for the lease is no earlier than June 2016 and no later than December 2022

In addition to the foregoing, during May 2011, American Greetings announced that it plans to relocate its world headquarters to the Crocker Park mixed use development in Westlake, Ohio, which offers a vibrant urban setting, with retail stores and restaurants, offices and apartments. After putting the project on hold pending the outcome of the Going Private Proposal, the Corporation announced plans in October 2013 to resume the project and on March 26, 2014, we purchased the land on which the new world headquarters will be built. The Corporation has leased the real property to its affiliate, H L & L, that will build the new world headquarters on the site. We have also entered into an operating lease with H L & L for the use of the new world headquarters building, an approximately 600,000 square foot building that we expect to be ready for occupancy in the summer of calendar 2016. Further details of the relocation undertaking are provided in Part III, Item 13 of this Annual Report, under “Related Persons Transactions – World headquarters relocation.”

Item 2.

Properties

As of February 29, 2016, we owned or leased approximately 7.6 million square feet of plant, warehouse and office space throughout the world, of which approximately 1.4 million square feet is leased space. We believe our manufacturing and distribution facilities are well maintained and are suitable and adequate, and have sufficient productive capacity to meet our current needs.

The following table summarizes, as of February 29, 2016, our principal plants and materially important physical properties and identifies as of such date the respective segments that use the properties described. In addition to the following, as of February 29, 2016, we also operated 397 card and gift retail stores throughout the United Kingdom, all of which were operated in premises that we leased from third parties. Although we sold our then existing North American retail operations segment in April 2009, in addition to the following, we remain subject to certain of the store leases on a contingent basis through our subleasing of stores to Schurman, which operates these retail stores throughout North America. For further information, see Note 1 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report.

*	— Indicates calendar year

Approximate Square Feet
Occupied

Expiration
Date of
Material
Leases^*

Location

Owned

Leased

Principal Activity

Cleveland, ^{(1) (3) (5)}

Ohio

1,194,414

⁽⁶

⁾

Bardstown,⁽¹⁾

Kentucky

413,500

Cutting, folding, finishing and packaging of greeting cards

Danville,⁽¹⁾

Kentucky

1,374,000

Distribution of everyday products including greeting cards

Osceola,⁽¹⁾

Arkansas

2,552,000

Cutting, folding, finishing and packaging of greeting cards and warehousing; distribution of seasonal products

Ripley,⁽¹⁾

Tennessee

165,000

Greeting card printing (lithography)

Greeneville,⁽¹⁾

Tennessee

1,000,000

Printing and packaging of seasonal greeting cards and wrapping items and order filling and shipping for Plus Mark LLC

Chicago, ⁽¹⁾

Illinois

45,000

2018

Administrative offices of Papyrus-Recycled Greetings, Inc.

Fairfield, ⁽¹⁾

California

10,700

⁽⁷

⁾

General offices of Papyrus-Recycled Greetings, Inc.

Mississauga,⁽¹⁾

Ontario, Canada

38,000

2018

General offices of Carlton Cards Limited and Papyrus-Recycled Greetings Canada Ltd.

Approximate Square Feet
Occupied

Expiration
Date of
Material
Leases^*

Location

Owned

Leased

Principal Activity

Mulgrave,⁽²⁾

Australia

30,000

2021

General offices of John Sands companies

Dewsbury,⁽²⁾

England

430,000

General offices of UK Greetings Ltd. and distribution of greeting cards and related products

Bretton Park,⁽²⁾

England

205,000

Warehouse and distribution center – Dewsbury

Corby, England ⁽²⁾

136,000

Distribution of greeting cards and related products

Warehouse ⁽²⁾

Princewood Road, England

25,000

2018

Offices – Corby

London, England⁽⁴⁾

25,560

2024

General offices of Clinton Cards

⁽¹⁾	North American Social Expression Products

⁽²⁾	International Social Expression Products

⁽³⁾	AG Interactive

⁽⁴⁾	Retail Operations

⁽⁵⁾	Non-reportable

⁽⁶⁾	Expiration date for the lease is no earlier than June 2016 and no later than December 2022

⁽⁷⁾	Currently leased on month-to-month basis

In addition to the foregoing, during May 2011, we announced that we plan to relocate our world headquarters to the Crocker Park mixed use development in Westlake, Ohio, which offers a vibrant urban setting, with retail stores and restaurants, offices and apartments. After putting the project on hold pending the outcome of the Going Private Proposal, we announced plans in October 2013 to resume the project and on March 26, 2014, we purchased the land on which the new world headquarters will be built. We have leased the real property to our affiliate, H L & L, that is building the new world headquarters on the site. We have also entered into an operating lease with H L & L for the use of the approximately 600,000 square foot new world headquarters building, as well as an additional 60,000 square foot office building, each of which we expect to be ready for occupancy during 2016. Further details of the relocation undertaking are provided in Part III, Item 13 of this Annual Report, under “Related Persons Transactions – World headquarters relocation.”

Item 3.

Legal Proceedings

AlInformation ~~Smith~~regarding etlegal ~~al.~~proceedings v.is ~~American~~described ~~Greetings~~in ~~Corporation. On June~~Note ~~4, 2014,~~16 Alto Smith and Jeffrey Hourcade, former fixture installation crew members for special projects, individually and on behalf of those similarly situated, filed a putative class action lawsuit against American Greetings Corporation in the ~~U.S.~~ ~~District~~Consolidated ~~Court~~Financial ~~for~~Statements ~~the Northern District of California, San Francisco Division. Plaintiffs claim that the Corporation violated certain rules~~ under ~~the Fair Labor Standards Act and California law~~Part II, including the California Labor Code and Industrial Welfare Commission Wage Orders. For themselves and the proposed classes, plaintiffs seek an unspecified amount of general and special damages, including but not limited to minimum wages, agreed upon wages and overtime wages, statutory liquidated damages, statutory penalties (including penalties under the California Labor Code Private Attorney General Act of 2004 (“PAGA”), unpaid benefits, reasonable attorneys’ fees and costs, and interest). In addition, plaintiffs request disgorgement of all funds the Corporation acquired by means of any act or practice that constitutes unfair competition and restoration of such funds to the plaintiffs and the proposed classes. On NovemberItem 6,8 ~~2014, plaintiffs filed a Second Amended Complaint to add claims for reimbursement~~ of ~~business~~this ~~expenses~~Annual ~~and failure to provide meal periods in violation of California Law and on December 12, 2014, amended their PAGA notice to include the newly added claims~~Report.

On January 20, 2015, the parties reached a settlement in principle that, if approved by the Court, will fully and finally resolve the claims brought by Smith and Hourcade, as well as the classes they seek to represent. The settlement was a product of extensive negotiations and a private mediation, which was finalized and memorialized in a Stipulation and Class Action Settlement Agreement signed March 30, 2015. The proposed settlement establishes a settlement fund of $4,000,000 to pay claims from current and former employees who worked at least one day for American Greetings Corporation and/or certain of its subsidiaries in any hourly non-exempt position in California between June 4, 2010 and the date of the Court’s preliminary approval of the settlement.

On March 31, 2015, plaintiffs filed a Motion for Preliminary Approval of Class Action Settlement. On April 30, 2015, the Court held a preliminary approval hearing. If the settlement is preliminarily approved, notice and claim forms will be mailed to class members and class members will have an opportunity to submit claims, to opt-out of the settlement, and/or to object to the settlement. As part of a Preliminary Approval Order, the Court will set a Final Approval Hearing to occur after the notice process, at which point the Court will consider the notice process and results, any objections, and other relevant information. The Court will then decide whether to finally approve the class settlement. If the settlement is finally approved, American Greetings will fund the settlement within twenty (20) days after passage of all appeal periods. Thereafter, the settlement funds will be disbursed as provided in the settlement agreement and the Court’s orders.

Michael Ackerman v. American Greetings Corporation, et al. On March 6, 2015, plaintiff Michael Ackerman, individually and on behalf of others similarly situated, filed a putative class action lawsuit in the United States District Court of New Jersey alleging violation of the Telephone Consumer Protection Act (“TCPA”) by American Greetings Corporation and its subsidiary, AG Interactive, Inc. The plaintiff claims that defendants (1) sent plaintiff an unsolicited text message notifying plaintiff that he had received an ecard; and (2) knowing and/or willfully violated the TCPA, which prohibits unsolicited automated or prerecorded telephone calls, including faxes and text messages, sent to cellular telephones. Plaintiff seeks to certify a nationwide class based on unsolicited text messages sent by defendants during the period February 8, 2011 through February 8, 2015. The plaintiff seeks damages in the statutory amount of $500 for each and every violation of the TCPA and $1,500 for each and every willful violation of the TCPA. We believe the plaintiffs’ allegations in this lawsuit are without merit and intend to defend the action vigorously.

Management does not believe, based on currently available information, that the outcome of these proceedings will have a material adverse effect on the Corporation’s business, consolidated financial position or results of operations, although the outcomes could be material to the Corporation’s operating results for any particular period, depending, in part, upon the operating results for such period.

In addition to the foregoing, we are involved in various judicial, administrative, regulatory and arbitration proceedings concerning matters arising in the ordinary course of business operations, including, but not limited to, employment, commercial disputes and other contractual matters. We, however, do not believe that any of the other litigation in which we are currently engaged, either individually or in the aggregate, will have a material adverse effect on our business, consolidated financial position or results of operations.

Item 4.

Mine Safety Disclosures

Not applicable.

1920

PART II

Item 5.

Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Prior to the closing of the Merger on August 9, 2013, our Class A common shares were listed on the New York Stock Exchange under the symbol AM. As a result of the Merger, we no longer have a class of equity that is publicly traded; rather, all of our common shares are held by CIHC. Prior to the Merger, the high and low sales prices of our Class A common shares, as reported in the New York Stock Exchange listing for the period from March 1, 2013 through August 9, 2013, were as follows:

	Year EndedFebruary 28, 2014
	High		Low
1st Quarter	$	18.50	$	15.96
2nd Quarter (through August 9, 2013)	$	19.20	$	16.95

As of August 9, 2013, as a result of the Merger, the Corporation had one shareholder, CIHC, which held 100 common shares of the Corporation.

Dividends. ~~Prior~~ toWe ~~the~~paid ~~closing of~~ the ~~Merger,~~following ~~we paid quarterly~~ dividends ofto ~~$0.15~~our ~~per~~sole ~~Class A~~shareholder ~~common share and Class B common share~~ during the ~~first~~past two ~~quarters of~~ fiscal ~~2014. Following the closing of the Merger, we stopped paying a quarterly dividend, but paid the following dividends to our sole shareholder~~years:

Dividend Date	Amount
September 30, 2014	$	18,194,951.06
January 2, 2014	$	7,225,246.10
February 10, 2014	$	50,000,000.00
July 3, 2014	$	9,865,000.00
August 15, 2014	$	14,288,688.00
February 17, 2015	$	13,919,488.00
June 25, 2015	$	5,000,000.00
August 17, 2015	$	13,893,750.00
August 20, 2015	$	1,830,455.44
February 16, 2016	$	13,893,750.00

Our borrowing arrangements, including our senior secured credit facility and the indenture governing our 7.375% senior notes due 2021, restrict our ability to pay shareholder dividends. Our borrowing arrangements also contain certain other restrictive covenants that are customary for similar credit arrangements. For example, our credit facility contains covenants relating to financial reporting and notification, compliance with laws, preservation of existence, maintenance of books and records, use of proceeds, maintenance of properties and insurance. In addition, our credit facility includes covenants that limit our ability to incur additional debt, declare or pay dividends, make distributions on or repurchase or redeem capital stock, make certain investments, enter into transactions with affiliates, grant or permit liens, sell assets, enter in sale and leaseback transactions, and consolidate, merge or sell all or substantially all of our assets. There are also financial covenants that require us to maintain a maximum leverage ratio (consolidated indebtedness minus unrestricted cash over consolidated Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”)) and a minimum interest coverage ratio (consolidated EBITDA over consolidated interest expense). These restrictions are subject to customary baskets and financial covenant tests. For a further description of the limitations on our ability to pay dividends that are imposed by our borrowing arrangements, see the discussion in Part II, Item 7, under the heading “Liquidity and Capital Resources” of this Annual Report, and Note 11 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report.

Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities.

None.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers.

We did not purchase any equity securities in the three months ended February 2829, ~~2015~~2016.

Item 6.

Selected Financial Data

Thousands of dollars

2015 (1)

2014 (2)

2013 (3)

2012 (4)

2011

2016 (1)

2015 (2)

2014 (3)

2013 (4)

2012 (5)

Summary of Operations

Net sales

1,~~986~~889,~~352~~994

1,~~941~~986,~~809~~352

1,~~842~~941,~~544~~809

1,~~663~~842,~~281~~544

1,~~565~~663,~~539~~281

Total revenue

21,~~010~~900,~~969~~790

12,~~969~~010,~~666~~969

1,~~868~~969,~~739~~666

1,~~695~~868,~~144~~739

1,~~597~~695,~~894~~144

Goodwill and other intangible assets impairment

~~21,924~~—

~~733~~21,924

—733

~~27,154~~—

—27,154

Interest expense

3627,~~020~~201

2736,~~363~~020

1727,~~896~~363

5317,~~073~~896

2553,~~389~~073

Net income

65129,~~107~~842

5065,~~522~~107

4950,~~918~~522

5749,~~198~~918

8757,~~018~~198

Financial Position

Inventories

~~248~~227,~~577~~456

~~254~~248,~~761~~577

~~242~~254,~~447~~761

~~208~~242,~~945~~447

~~179~~208,~~730~~945

Working capital

~~214~~181,~~474~~928

~~194~~214,~~447~~474

~~293~~194,~~310~~447

~~331~~293,~~679~~310

~~380~~331,~~555~~679

Total assets

1,~~535~~603,~~695~~449

1,~~602~~535,~~443~~695

1,~~583~~602,~~463~~443

1,~~549~~583,~~464~~463

1,~~547~~549,~~249~~464

Property, plant and equipment additions

9186,~~166~~018

5491,~~097~~166

~~114~~54,~~149~~097

78114,~~207~~149

3978,~~762~~207

Long-term debt

~~472~~406,~~729~~318

~~539~~472,~~114~~729

~~286~~539,~~381~~114

~~225~~286,~~181~~381

~~232~~225,~~688~~181

Shareholder’s equity

~~329~~429,~~326~~294

~~327~~329,~~447~~326

~~681~~327,~~877~~447

~~727~~681,~~458~~877

~~763~~727,~~758~~458

Net return on average shareholder’s equity from continuing operations

1934.82

1019.08

710.10

7.71

127.37

(1) During ~~2015~~2016, the Corporation ~~recognized~~received acash ~~gain~~proceeds of $~~35,004 on the sale of its display fixtures business, A~~105.G.0 ~~Industries,~~million ~~Inc.~~and ~~The~~recognized ~~Corporation also incurred~~ a ~~loss~~gain of $~~15,544~~61.2 million on the sale of ~~its~~the ~~current~~Strawberry ~~world~~Shortcake ~~headquarters~~character ~~location~~property. See Note 3 to the Consolidated Financial Statements under Part II, Item 8 of this Annual Report. It also received cash proceeds of $24.1 million for the surrender of certain corporate-owned life insurance policies.

(2) During ~~2014~~2015, the Corporation ~~incurred~~recognized ~~costs~~a ~~associated~~gain ~~with~~of ~~Merger,~~$35.0 ~~which~~million ~~included~~on ~~transaction~~the ~~costs~~sale ~~and~~of ~~incremental~~its ~~compensation~~display ~~expense~~fixtures ~~related~~business, toA.G. ~~the~~Industries, ~~settlement~~Inc. ofThe ~~stock~~Corporation ~~options~~also ~~and~~incurred ~~modification~~a ~~and~~loss ~~cancellation~~ of ~~outstanding~~$15.5 ~~restricted~~million ~~stock~~on ~~units~~the ~~and~~sale ~~performance~~of ~~shares~~its ofcurrent ~~$28.1~~world ~~million~~headquarters location. See Note 23 to the Consolidated Financial Statements under Part II, Item 8 of this Annual Report.

(3) During ~~2013~~2014, the Corporation incurred ~~charges~~costs ~~of $35.7 million~~ associated with the ~~Clinton Cards acquisition~~Merger, which ~~includes~~included atransaction ~~contract~~costs ~~asset~~and ~~impairment~~incremental ~~charge,~~compensation ~~bad~~expense ~~debt~~related ~~expense,~~to ~~legal~~the settlement of stock options and ~~advisory~~modification ~~fees~~and cancellation of outstanding restricted stock units and ~~impairment~~performance shares of ~~debt~~$28.1 ~~purchased~~million. See Note 32 to the Consolidated Financial Statements under Part II, Item 8 of this Annual Report. ~~The Corporation also incurred expenses of $6.9 million related to the Going Private Proposal.~~

(4) During ~~2012~~2013, the Corporation ~~recorded~~incurred acharges ~~loss~~ of $3035.87 million associated with the Clinton Cards acquisition, which isincludes ~~included~~a incontract ~~“Interest~~asset impairment charge, bad debt expense,” ~~related~~legal toand advisory fees and the ~~extinguishment~~impairment of ~~its~~debt ~~7.375%~~acquired, ~~senior~~as ~~notes~~well ~~and~~as 7expenses of $6.~~375%~~9 ~~notes~~million ~~due~~related ~~2016~~to the Going Private Proposal.

(5)	During 2012, the Corporation recorded a loss of $30.8 million, which is included in “Interest expense,” related to the extinguishment of its 7.375% senior notes and 7.375% notes due 2016.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the audited consolidated financial statements. This discussion and analysis, and other statements made in this Report, contain forward-looking statements. See “Factors That May Affect Future Results” at the end of this discussion and analysis for a discussion of the uncertainties, risks and assumptions associated with these statements.

OVERVIEW

Founded in 1906, we design, manufacture, distribute and sell social expression products including everyday and seasonal greeting cards. Headquartered in Cleveland, Ohio, as of February 2829, ~~2015~~2016, we employed approximately 2827,~~400~~500 associates around the world and are home to one of the world’s largest creative studios.

Our major domestic greeting card brands ~~are~~include American Greetings, Recycled Paper Greetings, Papyrus, Carlton Cards, Gibson, Tender Thoughts, ~~and~~ Just For You, Today and Always, justwink, Inventions, and P.S. Hello. Our other domestic products include DesignWare party goods, and Plus Mark gift wrap and boxed cards. We also create and license our intellectual properties, such as the Care Bears ~~and Strawberry Shortcake~~ characters. The Internet and wireless business unit, AG Interactive, is a leading provider of electronic greetings and other content for the digital marketplace. Our major Internet and wireless brands include AmericanGreetings.com, BlueMountain.com, justwink.com and Cardstore.com.

Our international operations include wholly-owned subsidiaries in the United Kingdom (also referred to herein as “UK”), Canada, Australia and New Zealand as well as licensees in countries around the world. As of February 2829, ~~2015~~2016, we also operated ~~412~~397 card and gift retail stores throughout the UK.

Business Strategy

Our objective is to continue to expand our position as a leading creator, manufacturer and distributor of social expression products by generating innovative products and services to meet the consumers’ needs to connect, express and celebrate life’s special moments. Our key strategic initiatives are to grow the greeting card business and focus on supply chain management and drive organizational efficiencies.

To grow the greeting card business, we will focus resources and further invest in our core greeting card business to enhance our product portfolio as well as expand channels of distribution. We seek to lead the category through differentiation and productivity, and thereby grow sales, primarily by concentrating efforts to enhance our product portfolio by leveraging one of the world’s largest creative studios and digital libraries of award-winning expressive content to create a full range of fresh and new greeting card designs each year; and expanding channels of distribution by developing and growing existing business, including by expanding Internet and other channels of electronic distribution over the long term to make us the natural and preferred greetings solution, as well as capture any shifts in consumer demand.

By focusing on supply chain management and organization efficiencies, we will seek to improve the way we develop, manufacture, distribute and service our products. In addition, we will continue to concentrate on ways to create sustainable cost savings by, among other things, continuously balancing the mix of manufacturing and outsourcing production and reducing overhead and fixed costs. We intend to maximize the profitability of greeting card sales by reducing cost of goods sold and improving the efficiency of shipments to reduce scrap, order filling, freight and merchandiser costs while maintaining sell-through productivity. We also intend to focus additional resources on streamlining back office processes in order to reduce general and administrative expenses. Additionally, while investment in the online and digital business is expected to continue, we plan to maintain a disciplined approach to marketing spend, investing in products and ventures that will continue to drive our market offerings and positioning.

The execution of these strategies will require us to incur incremental costs, which may include additional spending, including upfront costs prior to any incremental revenue being generated, which may adversely affect our operating results and cash flows.

Operating Results

Total revenue for ~~2015~~2016 was $21.01 90 billion, ana ~~increase~~decrease of approximately $41110.2 million or 25.15% compared to the prior year. This ~~improvement~~decrease was primarily driven by the ~~result~~unfavorable impact of ~~higher~~foreign ~~sales~~currency translation of ~~greeting~~approximately ~~cards~~$59 million, ~~gift~~lower ~~packaging~~sales ~~and~~of ~~party~~greeting ~~goods~~cards, and the ~~year-over~~decrease ~~year favorable impact~~ of ~~fewer~~revenue ~~SBT implementations~~related into the ~~current~~sale ~~year,~~of ~~primarily~~our ~~within~~display ~~the~~fixtures ~~North~~business ~~American~~at ~~Social~~the ~~Expression~~end ~~Products~~of ~~segment.~~the ~~This~~prior ~~improvement~~year ~~was~~second ~~partially~~quarter ~~offset~~and bythe Strawberry ~~lower~~Shortcake ~~revenues~~character ~~from~~property ~~our~~(“Strawberry ~~fixtures~~Shortcake”) ~~business which was sold~~ at the ~~end~~beginning of the current year ~~second quarter~~. ~~Foreign~~These ~~currency~~amounts ~~translation~~were ~~had~~partially aoffset ~~favorable~~with ~~impact~~increased sales of ~~approximately~~party $4goods ~~million~~and gift packaging products.

Operating income for ~~2015~~2016 was $~~144~~219.40 million compared to $~~136~~144.9 4 million in the prior year, an improvement of $774.56 million. The current and prior years were significantly impacted by business transactions, asset impairments and SBT implementations. The current year includes a gain of $3561.02 million related to the sale of ~~our~~Strawberry ~~display fixtures business~~Shortcake, ~~A.G. Industries, Inc. (dba AGI In-Store “AGI In-Store”),~~ for which we received $73105.70 million in cash~~, subject to closing date working capital adjustments~~. The current year also includes aincome ~~loss from the sale~~ of ~~our current world headquarters. Net of transaction costs, we received~~ $139.51 million ~~cash~~ from ~~the~~non-income ~~sale,~~based ~~and~~tax ~~recorded~~credits areceived ~~non-cash~~from ~~loss~~the onState ~~disposal~~ of ~~$15.5~~Ohio ~~million~~under ~~during~~certain ~~the~~incentive ~~year,~~programs ofmade ~~which~~available ~~$13.3~~to ~~million~~us ~~was~~in ~~recorded~~connection ~~within~~with the ~~North American~~relocation ~~Social~~of ~~Expression~~our ~~Products~~world ~~segment~~headquarters ~~and~~within $2Ohio.2 ~~million~~These ~~was~~credits ~~recorded~~had no ~~within~~comparable amounts in the ~~Unallocated~~prior ~~segment~~year.

In addition, current year operating income includes a non-cash ~~intangible~~net contract asset impairment ~~charge~~charges of approximately $~~21.9~~8 million, primarily related to ~~the~~a ~~Clinton~~change ~~Cards~~in ~~tradename,~~expected afuture ~~contract~~economic ~~asset~~benefit ~~impairment~~on ~~related~~certain tofixed aterm customer ~~bankruptcy~~agreements ofin ~~$4.4 million within~~ the ~~North~~International ~~American~~ Social Expression Products segment , and a non-cash fixed asset impairment ~~charges~~charge of $34.7 1 million within the Retail Operations segment~~, all recorded during the fourth quarter~~. The current year includes the unfavorable impact of approximately $65 million related to SBT implementations.

Operating income in the prior year period included ~~approximately~~a gain on the sale of the fixtures business of $2835.0 million, loss on the sale of ~~costs~~our current world headquarters building, a non-cash intangible asset impairment charge of $21.9 million, a contract asset impairment of $4.4 million related to ~~the~~a ~~Merger~~customer bankruptcy, fixed asset impairment charges of $3.7 million and the unfavorable impact of approximately $13 6 million related to SBT implementations.

Excluding the impact of the business transactions, asset impairments and SBT implementations, operating income was ~~lower~~higher in the current year compared to the prior year, driven by ~~lower~~higher earnings within the Retail Operations, ~~Non-reportable~~segment ~~and~~along ~~International~~with ~~Social~~lower ~~Expression~~variable ~~Product~~compensation ~~segments.~~expense ~~These~~within ~~unfavorable~~the ~~results~~Unallocated ~~were~~segment, ~~partially~~ offset by ~~improved~~ lower earnings ~~within~~in the International ~~North American~~ Social Expression Products and AGNorth ~~Interactive~~American Social Expression Products segments.

Capital expenditures during the current year were approximately $9186.0 million, ana ~~increase~~decrease of approximately $375.1 million from the prior year. The ~~increase~~decrease in capital expenditures compared to ~~2014~~2015 related primarily to ~~increased~~lower investments within our Retail Operations segment, ~~the~~and a prior year purchase of a new building in the UK within our International Social ~~Expressions~~ ~~Product~~Expression Products segment, ~~and~~substantially ~~land~~offset ~~related~~by toincreased ~~our~~investment ~~new~~in ~~world headquarters. We expect that capital expenditures will be generally higher than historic levels as we continue to execute~~ our ~~multi-year information~~ systems refresh ~~and other strategic projects~~project.

RESULTS OF OPERATIONS

Comparison of the years ended February 2829, ~~2015~~2016 and ~~2014~~February 28, 2015

In ~~2015~~2016, net income was $65129.18 million compared to $5065.51 million in ~~2014~~2015.

Our results for ~~2015~~2016 and ~~2014~~2015 are summarized below:

(Dollars in thousands)	~~2015~~2016			% TotalRevenue			~~2014~~2015			% TotalRevenue
Net sales	$	1,~~986~~889,~~352~~994			9899.84%	%	$	1,~~941~~986,~~809~~352			98.68%	%
Other revenue		2410,~~617~~796			10.26%	%		2724,~~857~~617			1.42%	%
Total revenue		21,~~010~~900,~~969~~790			100.0%	%		12,~~969~~010,~~666~~969			100.0%	%
Material, labor and other production costs		~~882~~844,~~337~~839			4344.94%	%		~~857~~882,~~227~~337			43.59%	%
Selling, distribution and marketing expenses		~~696~~656,~~543~~799			34.6%	%		~~685~~696,~~088~~543			34.86%	%
Administrative and general expenses		~~289~~252,~~433~~983			1413.43%	%		~~297~~289,~~443~~433			1514.14%	%
Goodwill and other intangible assets impairment		~~21,924~~—			10.10%	%		~~733~~21,924			01.01%	%
Other operating income		(23,674	)		(1.2	%)		(7,718	)		(0.4	%)
Other operating income—net		(72,858	)		(3.8%)			(23,674	)		(1.2%)
Operating income		~~144~~219,~~406~~027			711.25%	%		~~136~~144,~~893~~406			7.02%	%
Interest expense		3627,~~020~~201			1.84%	%		2736,~~363~~020			1.48%	%
Interest income		(~~2,639~~356	)		(0.10%)	%)		(~~400~~2,639	)		(0.01%)	%)
Other non-operating expense (income) - net		319			0.0	%		(3,296	)		(0.2	%)
Other non-operating expense – net		1,193			0.1%			319			0.0%
Income before income tax expense		~~110~~190,~~706~~989			510.50%	%		~~113~~110,~~226~~706			5.85%	%
Income tax expense		4561,~~599~~147			2.3.2%	%		6245,~~704~~599			3.2.3%	%
Net income	$	65129,~~107~~842			36.28%	%	$	5065,~~522~~107			23.62%	%

Revenue Overview

During ~~2015~~2016, consolidated net sales were $1.9989 billion, updown from $1.9499 billion in the prior year. This 24.39%, or $4496.54 million, ~~increase~~decrease was driven by ~~higher~~the ~~sales~~unfavorable impact of ~~greeting~~foreign ~~cards~~currency translation of approximately $4459 million, ~~increased~~lower sales offrom ~~gift~~our display ~~packaging~~fixtures business, ~~party~~which ~~goods and~~was ~~other~~sold ~~ancillary~~in ~~products~~the prior year second quarter, of approximately $2220 million, ~~the~~lower ~~favorable~~sales ~~impact~~ of ~~fewer~~greeting ~~SBT~~cards ~~implementations during the year~~ of approximately $833 million, and the ~~favorable~~unfavorable impact of ~~foreign~~higher ~~currency~~contract ~~translation~~asset impairments (net of the recovery) of approximately $43 million. These ~~increases~~ decreases were partially offset by ~~lower~~increased sales ~~from~~of ~~our~~party ~~display~~goods ~~fixtures~~and ~~business,~~gift ~~which~~packaging ~~was~~products ~~sold in the current year second quarter,~~ of approximately $29 11 million and a$7 ~~contract~~million, ~~asset~~respectively, ~~impairment~~and ~~related~~the tofavorable aimpact ~~customer~~of ~~bankruptcy~~fewer SBT implementations of approximately $4 1 million.

The contribution of each major product category as a percentage of net sales for the past two fiscal years was as follows:

	2015			2014
	2016			2015
Everyday greeting cards		48%	%		4748%	%
Seasonal greeting cards		25%	%		2425%	%
Gift packaging and party goods		1718%	%		1617%	%
All other products*		109%	%		1310%	%

* The “~~all~~All other products” classification includes, among other things, stationery, ornaments, custom display fixtures (prior to August 2014), stickers, online greeting cards, other online digital products and specialty gifts.

Other revenue, which is primarily driven by royalty revenue from our ~~Strawberry~~character ~~Shortcake and Care Bears~~ properties, decreased $313.3 8 million from $2724.9 6 million during ~~2014~~2015 to $2410.68 million in 2016. The year-over-year decrease is primarily due to the sale of Strawberry Shortcake, which was completed in March 2015. As such, royalty revenue related to Strawberry Shortcake for the prior year does not have a comparative amount in the current year.

Wholesale Unit and Pricing Analysis for Greeting Cards

Unit and pricing comparatives (on a sales less returns basis) for ~~2015~~2016 and ~~2014~~2015 are summarized below:

	Increase (Decrease) From the Prior Year
	Everyday Cards						Seasonal Cards						Total Greeting Cards
	2015			2014			2015			2014			2015			2014
	2016			2015			2016			2015			2016			2015
Unit volume		1.(2.8%)	%		(21.92%	%)		3(1.03%)	%		(13.90%	%)		1(2.73%)	%		(21.67%	%)
Selling prices		42.60%	%		34.16%	%		10.23%	%		2.1.2%	%		31.5%	%		23.85%	%
Overall increase		5.8	%		0.1	%		4.2	%		0.1	%		5.3	%		0.1	%
Overall increase / (decrease)		(0.9%)			5.8%			(1.0%)			4.2%			(0.9%)			5.3%

During ~~2015~~2016, total wholesale greeting card sales less returns ~~increased~~decreased 50.39% compared to the prior year, with a 32.53% ~~increase~~decrease in ~~selling~~unit ~~prices~~volume ~~and~~partially aoffset ~~1.7%~~by an increase in ~~unit~~selling ~~volume~~prices of 1.5%. The overall ~~increase~~decrease was driven primarily by ~~increases~~decreases in ~~selling prices and~~ unit volume from both our everyday and seasonal greeting cards in our North American Social Expression Products and ~~segment.~~International ~~Also~~Social ~~contributing~~Expression toProducts ~~the~~segments. ~~overall~~Partially ~~increase~~offsetting these decreases were increases in selling prices from our everyday greeting cards ~~and~~in ~~improvement~~our inNorth ~~unit~~American ~~volume~~Social ~~from~~Expression Products segment and seasonal greeting cards in ~~the~~ our International Social Expression Products segment.

Everyday card sales less returns were updown 50.89% compared to the prior year, as a result of ~~increases~~a ~~in selling prices~~ decrease of 42.68% ~~and~~in unit volume, partially offset by an increase in selling prices of 1.2.0%. The increase in selling prices was driven primarily by general price increases ~~and favorable product mix within the core product line~~, which more than offset the continued unfavorable shift to a higher proportion of value cards. The unit volume ~~improvement~~decline was primarily driven by ~~additional~~soft ~~distribution~~retail ~~with~~productivity ~~existing~~within ~~customers~~our ~~in the~~ North American Social Expression Products ~~segment~~and International Social Expression Products segments.

Seasonal card sales less returns ~~increased~~decreased 41.20%, with unit volume ~~growth~~decreasing ofby 31.03%, ~~and~~partially offset by selling price, ~~increases~~which ofincreased 10.23%. The ~~increase~~decrease in unit volume was attributable to our ~~Mother~~Valentine’s Day, and Easter programs in both our North American Social Expression Products and International Social Expression Products segments and the Christmas program in our International Social Expression Products segment. These decreases were partially offset by unit volume increases in our Mother’s Day and Father’s Day programs in both our North American Social Expression Products and International Social Expression Products segments and our Christmas program in our North American Social Expression Products segment. The increase in selling prices was driven by our ~~Father~~Valentine’s Day program in both our North American Social Expression Products and International Social Expression Products segments, ~~Graduation~~our Mother’s Day program in our North American Social Expression Products segment and our Christmas program in our International Social Expression Products segment. Offsetting these increases were decreases in selling prices in our Easter and Father’s Day programs in both our North American Social Expression Products and International Social Expression Products segments, our Christmas program in our North American Social Expression Products segment and our Mother’s Day program in our International Social Expression Products segment.

Expense Overview

Material, labor and other production costs (“MLOPC”) for 2015 were $882.3 million, an increase of $25.1 million from $857.2 million in the prior year. As a percentage of total revenue, these costs were 43.9% in 2015 compared to 43.5% in 2014. The increase was primarily due to the impact of higher sales and unfavorable product mix in the current year as well as the unfavorable impact of foreign currency translation of approximately $4 million. Partially offsetting these increases were lower product display material costs and the elimination of costs related to the display fixtures business that was sold in the current year second quarter.

~~Selling,~~Expense ~~distribution~~Overview and marketing expenses (“SDM”) for 2015 were $696.5 million, an increase of $11.4 million from $685.1 million in the prior year. As a percentage of total revenue, these costs were 34.6% in the current year compared to 34.8% in the prior year. The dollar increase was primarily driven by higher supply chain costs of approximately $3 million, the unfavorable impact of foreign currency translation of approximately $4 million and increased retail store expenses of approximately $10 million, which included approximately $4 million of fixed asset impairment charges. Partially offsetting these increases were lower sales, marketing and product management expenses of approximately $4 million and the elimination of approximately $2 million of costs related to the display fixtures business that was sold in the current year second quarter.

~~Administrative~~Material, labor and ~~general~~other ~~expenses~~production costs (“MLOPC”) for ~~2015~~2016 were $~~289~~844.48 million, a decrease of $837.05 million from $~~297~~882.43 million in the prior year. ~~The~~ ~~prior~~As ~~year~~a ~~included~~percentage ~~costs and fees~~ of ~~approximately~~total ~~$28~~revenue, ~~million~~these ~~related~~costs towere ~~the~~44.4% ~~Merger~~in ~~(See~~2016 ~~Note~~compared ~~2, “Merger,”~~ to ~~the~~43.9% ~~Consolidated~~in ~~Financial~~2015. ~~Statements~~The ~~under~~dollar ~~Part~~decrease ~~II,~~was ~~Item 8~~primarily ofdue ~~this Annual Report for further information). Also contributing~~ to the ~~decrease~~favorable ~~were~~impact ~~lower~~of ~~costs~~foreign incurrency ~~the~~translation ~~AG Interactive segment~~ of approximately $327 million ~~driven by prior year cost savings initiatives~~, the elimination of approximately $220 million of costs related to the display fixtures business that was sold in the ~~current~~prior year second quarter, the favorable impact on lower sales in our wholesale business and ~~other~~higher ~~general~~gross ~~cost~~margin ~~savings~~on ofconsistent ~~approximately~~sales $3in ~~million.~~our ~~These~~Retail ~~decreases~~Operations ~~were~~segment, and ~~partially~~the ~~offset~~positive byimpact ~~approximately~~of ~~$22~~a ~~million~~smaller inventory build of ~~higher~~intercompany-supplied ~~variable~~products ~~compensation~~in ~~expense~~the ~~related~~Retail Operations segment in the current year compared to ~~corporate~~the ~~bonus~~prior year, and ~~long~~ thus less elimination of intercompany profit in inventory, year-~~term~~over-year. Partially ~~incentive~~offsetting ~~programs~~these ~~and~~decreases were higher ~~technology~~product ~~costs~~content of approximately $6 million and higher production expenses of approximately $15 million.

ASelling, ~~non-cash~~distribution ~~intangible~~and ~~asset~~marketing ~~impairment~~expenses ~~charge~~(“SDM”) for 2016 were $656.8 million, a decrease of $2139.97 million ~~was recorded~~from $696.5 million in ~~2015,~~the asprior year. ~~indicators~~As ~~emerged~~a ~~during~~percentage ~~the~~of ~~period~~total revenue, ~~fourth~~these ~~quarter~~costs ~~holiday~~were ~~results~~34.6% in ~~particular,~~both ~~that~~the ~~led~~current usyear toand ~~adjust~~prior ~~our~~year. ~~future~~The ~~cash~~dollar ~~flow~~decrease ~~expectations.~~was Asprimarily ~~such,~~driven asby wethe ~~performed~~favorable ~~our~~impact ~~annual~~of ~~impairment~~foreign ~~testing~~currency translation of ~~indefinite-lived~~approximately ~~intangible assets~~$27 ~~during~~million, ~~the~~lower ~~fourth~~supply ~~quarter~~chain costs of ~~2015~~approximately $5 million, wethe ~~determined~~elimination ~~that~~of approximately $2 million related to the ~~Clinton~~display ~~Cards~~fixtures ~~tradename~~business that was ~~fully~~sold ~~impaired~~in the prior year second quarter, lower store operating expenses in our Retail Operations segment of approximately $2 million and other general cost savings of approximately $3 million.

~~Other~~Administrative ~~operating~~and ~~income~~general ~~was~~expenses for 2016 were $23253.70 million ~~during~~, ~~the~~a ~~current~~decrease ~~year~~of $36.4 ~~compared~~million tofrom $7289.74 million in the prior year. ~~The~~This ~~increase~~decrease was driven primarily by ~~the~~lower ~~gain~~variable oncompensation ~~the~~expense ~~sale~~in ofthe ~~AGI~~current ~~In-Store~~year of approximately $~~35.0~~14 million, ~~partially~~the ~~offset~~favorable byimpact ~~a non-cash loss recorded upon sale~~ of ~~our~~foreign ~~current~~currency ~~world~~translation ~~headquarters location~~ of approximately $~~15.~~5 million~~. In addition~~, ~~in both~~ the ~~current~~elimination ~~and~~of ~~prior~~approximately ~~years,~~$2 ~~based~~million onrelated ~~updated~~to ~~estimated~~the ~~recovery~~display ~~information~~fixtures ~~provided~~business inthat ~~connection~~was ~~with~~sold in the ~~Clinton~~prior ~~Cards~~year ~~bankruptcy~~second ~~administration~~quarter, wethe ~~recorded~~elimination anof ~~impairment~~expenses ~~recovery~~ related to the ~~senior~~ ~~secured~~former ~~debt~~stock ofcompensation ~~Clinton~~program ~~Cards~~of ~~that~~approximately ~~we acquired in May 2012 and subsequently impaired. The recovery was~~ $~~3.4~~7 million, approximately ~~in the current year and~~ $~~4.9~~7 million ~~the~~of ~~prior~~lower ~~year.~~costs ~~The~~in ~~current~~this ~~year~~category ~~recovery represents the full recovery of the impairment. The income~~ related to ~~the~~our ~~impairment~~Retail ~~recovery~~Operations insegment ~~the~~and ~~current~~other ~~year~~general ~~was~~cost ~~partially~~savings ~~offset by other expenses~~ of approximately $2.1 million ~~related to the Clinton Cards bankruptcy administration~~.

~~Interest~~A ~~expense~~non-cash ~~was~~intangible ~~$36.0 million~~asset ~~during~~impairment ~~the~~charge ~~current year, up from $27.4 million in the prior year. The increase~~ of $821.6 9 million was ~~primarily attributable~~recorded ~~to increased borrowings~~ in ~~connection~~2015, ~~with~~which ~~the~~fully ~~Merger~~impaired ~~as well as~~ the ~~impact~~Clinton ofCards ~~the credit facility amendment and term loan prepayments~~tradename. ~~The~~There ~~current~~was ~~year~~no ~~period includes twelve months of interest on these increased borrowings while the~~comparable ~~prior~~charge ~~year~~in ~~period included slightly less than seven months. For further information related to our borrowings, see Note 11, “Debt,” to~~ the ~~Consolidated~~current ~~Financial Statements under Part II, Item 8 of this Annual Report~~year.

~~Interest~~Other operating income - net was $272.69 million induring the current year compared to $023.47 million in the prior year. ~~During~~The current year includes a gain on the ~~current~~sale ~~year,~~of asStrawberry ~~part~~Shortcake of $61.2 million and income of $9.1 million from the ~~Clinton~~non-income ~~Cards~~based tax credits received from the State of Ohio under certain incentive programs made available to us in connection ~~bankruptcy~~with ~~administration~~the relocation of our world headquarters within Ohio. The prior year included a gain on the sale of our display fixtures business, weAGI ~~received~~In-Store, of $35.0 million, partially offset by a non-cash ~~distribution~~loss asrecorded ~~part~~upon sale of ~~the~~our ~~liquidation~~current ~~process~~world headquarters ~~that~~location ~~included~~of $215.5 million. ofIn ~~interest~~addition, in the prior year, based on ~~our~~updated ~~senior~~estimated recovery information provided in connection with the Clinton Cards bankruptcy administration, we recorded an impairment recovery related to the senior secured debt of Clinton Cards that we acquired in May 2012 and subsequently impaired. The recovery was ~~previously~~$3.4 ~~not~~million ~~expected~~in tothe beprior ~~received~~year.

~~Other~~Interest ~~non-operating~~ expense was ~~(income)~~$27.2 –million ~~net~~during ~~was~~the ~~expense~~current ofyear, down from $36.0 million in the prior year.3 The decrease of $8.8 million was primarily attributable to lower debt levels in the current year, ~~compared~~as toa result of $~~3.3~~140 million of ~~income~~prepayments on our term loans in the ~~prior~~fourth ~~year.~~quarter ~~The prior~~of ~~year~~2015 ~~included~~and athe ~~gain~~first quarter of $3the current year.3 ~~million~~For ~~associated~~further ~~with~~information related to our ~~investment~~borrowings, insee aNote ~~third~~11, ~~party.~~“Debt,” to the Consolidated Financial Statements under Part II, Item 8 of this Annual Report.

~~The~~Interest ~~effective~~income ~~tax rate~~ was 41$0.~~2% and 55.~~4% ~~during~~million ~~2015 and 2014, respectively. The higher than statutory rate~~ in ~~2015~~the ~~was~~current ~~primarily~~year ~~due~~compared to ~~the surrender of certain corporate-owned life insurance policies that resulted in an increase in tax expense of~~ $282.36 million. ~~The~~in ~~increase was partially offset by~~ the ~~benefit~~ ofprior ~~dual consolidation losses of our branches totaling $13~~year.3 ~~million~~During ~~and~~ the ~~benefit~~prior ofyear, ~~the~~as ~~net~~part ~~release~~ of ~~valuation~~the ~~allowances~~Clinton ofCards bankruptcy ~~$4.2~~administration, ~~million.~~we ~~The~~received ~~higher~~a ~~than~~cash ~~statutory~~distribution ~~tax~~as ~~rate~~part inof the ~~prior~~liquidation ~~year~~process ~~was~~that ~~due~~included ~~to an increase of~~ $122.65 million ~~to the~~of ~~valuation~~interest ~~allowance~~on ~~against~~our ~~certain~~senior ~~net~~secured ~~operating~~debt ~~loss~~of ~~and~~Clinton ~~foreign~~Cards ~~tax credit carryforwards~~ that ~~we believed at the time would expire unused and an increase in the state income tax expense due to the receipt of intercompany foreign dividends. The valuation allowance~~ was ~~recorded~~previously innot ~~accordance~~expected ~~with Internal Revenue Code section 382 and 383 due~~ to ~~the~~be ~~Merger as previously disclosed~~received.

The effective tax rate was 32.0% and 41.2% during 2016 and 2015, respectively. The lower than statutory rate for the current fiscal year was due to the domestic production activities deduction, the tax treatment of corporate-owned life insurance, the benefit of dual consolidated losses of the Corporation’s branches, changes in uncertain tax benefits, and

federal provision to return adjustments. This decrease was partially offset by losses in our foreign jurisdictions that have lower tax rates. The higher than statutory rate in the prior year was primarily due to the surrender of certain corporate-owned life insurance policies that resulted in an increase in tax expense of $28.3 million. The increase was partially offset by the benefit of dual consolidation losses of our branches totaling $13.3 million and the benefit of the net release of valuation allowances of $4.2 million.

Segment Results

Our operations are organized and managed according to a number of factors, including product categories, geographic locations and channels of distribution. Our North American Social Expression Products segment primarily designs, manufactures and sells greeting cards and other related products through various channels of distribution with mass merchandising as the primary channel. The International Social Expression Products ~~segments~~segment primarily ~~design,~~designs ~~manufacture~~ and ~~sell~~sells greeting cards and other related products through various channels of distribution, ~~with~~and ~~mass~~is ~~retailers~~located asprincipally in the ~~primary~~ ~~channel~~United Kingdom, Australia and New Zealand. As permitted under Accounting Standards Codification (“ASC”) Topic 280 (“ASC 280”), “Segment Reporting,” certain operating segments have been aggregated into the International Social Expression Products segment. The aggregated operating divisions have similar economic characteristics, products, ~~production~~sourcing processes, types of customers and distribution methods. At February 2829, ~~2015~~2016, we operated ~~412~~397 card and gift retail stores in the UK through our Retail Operations segment. These stores sell products purchased from the International Social Expression Products segment as well as products purchased from other vendors. The AG Interactive segment 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 Non-reportable segment primarily includes licensing activities and, prior to the disposition of AGI In-Store on August 29, 2014, the design, manufacture and sales of display fixtures.

Segment results are reported using actual foreign exchange rates for the periods presented. Refer to Note 19, “Business Segment Information,” to the Consolidated Financial Statements under Part II, Item 8 of this Annual Report for further information and a reconciliation of total segment revenue to consolidated “Total revenue” and total segment earnings (loss) before tax to consolidated “Income before income tax expense.”

North American Social Expression Products Segment

(Dollars in thousands)

~~2015~~2016

~~2014~~2015

% Change

Total revenue

1,~~316~~317,~~617~~277

1,~~253~~316,~~842~~617

5.0.1%

Segment earnings

~~193~~203,~~176~~859

~~172~~193,~~502~~176

125.05%

Total revenue of our North American Social Expression Products segment increased $620.87 million compared to the prior year. The ~~increase~~prior ~~was~~year ~~primarily~~included ~~driven~~a bycontract ~~higher~~asset ~~sales~~impairment and the current year includes a slight recovery of ~~greeting~~that ~~cards~~impairment, causing a net year-over-year favorable variance of approximately $405 million,. ~~increased~~The remaining increase was primarily driven by increased sales of gift packaging, party goods and other ancillary products of approximately $2823 million, and the favorable impact of fewer SBT implementations during the year of approximately $71 million. These ~~favorable~~improvements ~~items~~ were ~~partially~~ offset by the unfavorable impact of foreign currency translation of approximately $814 million, and alower ~~contract~~sales ~~asset~~of ~~impairment~~greeting ~~related~~cards ~~to a customer bankruptcy~~ of approximately $414 million.

Segment earnings increased $2010.7 million compared to the prior year. The increase was driven primarily by the ~~impact~~prior ~~of higher~~year revenues which provided approximately $51 million of additional gross margin, including the favorable impact of fewer SBT implementations of approximately $6 million. This improvement in earnings was partially offset by a non-cash loss related to the sale of our current world headquarters location, of which approximately $13 million of the total loss of $15.5 million was recorded within the North American Social Expression Products segment, anand ~~increase~~the incontract ~~variable~~asset ~~compensation expense~~impairment noted above. In addition, the current year includes the impact of higher revenue before the impact of foreign currency translation, which provided approximately $72 million of additional gross margin, ~~higher~~offset ~~technology~~by ~~costs~~the unfavorable impact of foreign currency translation of approximately $65 million and ~~increased~~higher ~~supply~~technology ~~chain~~ costs of approximately $4 million.

International Social Expression Products Segment

(Dollars in thousands)	2015		2014		% Change
Total revenue	$	257,596	$	249,790		3.1	%
Segment earnings		7,508		9,270		(19.0	%)

Total revenue of our International Social Expression Products segment increased $7.8 million compared to the prior year. The increase was primarily driven by higher sales of greeting cards of approximately $5 million, the favorable impact of fewer SBT implementations during the year of approximately $1 million and the favorable impact of foreign currency translation of approximately $2 million.

~~Segment~~International ~~earnings~~Social ~~decreased~~Expression ~~$1.8~~Products ~~million compared to the prior year.~~ Segment earnings were unfavorably impacted by upfront costs related to cost savings initiatives and a lower gross margin percentage driven by lower seasonal yield rates, an unfavorable pricing rate variance and higher product content costs.


(Dollars in thousands)	2016			2015		% Change
Total revenue	$	206,351		$	257,596		(19.9%)
Segment (loss) earnings		(11,710	)		7,508		(256.0%)

Total revenue of our International Social Expression Products segment decreased $51.2 million compared to the prior year. The decrease was primarily driven by the unfavorable impact of foreign currency translation of approximately $21 million, lower sales of greeting cards of approximately $20 million, the unfavorable impact of contract asset impairments of approximately $9 million, and decreased sales of other ancillary products of approximately $1 million. The majority of the lower sales of greeting cards were due to the reduced distribution to a significant customer that is expected to continue into next fiscal year.

Segment earnings decreased $19.2 million compared to the prior year. The decreased earnings were primarily driven by the impact of lower sales, including the contract asset impairment charges of approximately $9 million, increased product and scrap costs, partially offset by lower supply chain and general and administrative costs.

Retail Operations Segment

(Dollars in thousands)

~~2015~~2016

~~2014~~2015

% Change

Total revenue

~~336~~313,~~860~~759

~~332~~336,~~066~~860

1(6.49%)

Segment loss

(3522,~~007~~904

)

(435,~~637~~007

)

~~(654~~34.96%

Total revenue of our Retail Operations segment ~~increased~~decreased $~~4.8~~23 million compared to the prior year. The ~~increase~~decrease was driven by the unfavorable impact of ~~favorable~~ foreign ~~exchange~~currency translation of approximately $1023 million. During the current year, net sales at stores open one year or more were ~~down~~higher by approximately 21.42% compared to the prior year.

Segment ~~earnings~~loss decreased $3012.41 million compared to the prior year. The ~~lower~~decrease ~~segment~~was ~~earnings~~driven ~~were~~by ~~the result of~~ lower ~~sales~~store ~~(excluding~~operating ~~the impact of foreign exchange translation), lower gross margins~~ and ~~higher~~overhead ~~store operating~~ costs, ~~as well as fixed asset impairment charges~~ of approximately $4 9 million., ~~The~~a ~~lower~~slightly higher gross ~~margins~~margin ~~were~~on flat sales before the ~~result~~impact of ~~increased~~foreign ~~promotional~~currency ~~pricing~~translation, ~~activities~~ and ~~increased~~ ~~inventory~~the ~~shrink~~net ~~expense.~~favorable ~~The~~impact ~~majority~~ of ~~the~~foreign ~~higher~~exchange ~~store~~translation ~~operating~~on ~~costs was~~ the ~~result~~loss of ~~new~~approximately ~~store~~$2 ~~openings~~million. ~~While~~The wecurrent ~~are~~and ~~disappointed~~prior ~~with this~~ year’s ~~operating~~ results, ~~we continue to adjust our strategies to better position~~include ~~ourselves~~fixed ~~within~~asset ~~the~~impairment ~~very~~charges ~~competitive~~of UKapproximately ~~retail~~$4.1 ~~environment~~million and we$3.7 ~~remain~~million, ~~committed to achieving the multi-year turnaround of the business~~respectively.

AG Interactive Segment

(Dollars in thousands)

~~2015~~2016

~~2014~~2015

% Change

Total revenue

5856,~~995~~483

6158,~~084~~995

(3.4.3%)

Segment earnings

2119,~~668~~126

1521,~~540~~668

39(11.47%)

Total revenue of our AG Interactive segment decreased $2.15 million compared to the prior year. The decrease in revenue was driven ~~primarily~~ by lower subscription revenue and the unfavorable impact of foreign currency translation of approximately $1 million. As of February 2829, ~~2015~~2016, AG Interactive had approximately 3.54 million online paid subscriptions as compared to approximately 3.75 million at February 28, ~~2014~~2015.

~~Despite~~Segment ~~the lower revenue, segment~~ earnings ~~increased~~decreased $62.15 million in the current year., ~~The~~primarily ~~earnings~~due ~~improvement~~to ~~was~~decreased ~~the result of significant cost savings~~revenue ~~programs~~and ~~initiated in~~ the ~~prior~~unfavorable ~~year~~impact ~~that~~of ~~have~~foreign ~~driven~~currency ~~costs~~translation ~~lower in most functional areas~~ of ~~the~~approximately ~~business~~$1 million.

Non-reportable Segment

(Dollars in thousands)

~~2015~~2016

~~2014~~2015

% Change

Total revenue

406,~~901~~920

7240,~~884~~901

(4383.91%)

Segment earnings

959,~~810~~135

249,~~521~~810

~~(60~~502.08%

Total revenue from our Non-reportable segment decreased $3234.0 million compared to the prior year. Approximately $2920 million of the decrease is related to sales in the prior year of the display fixtures business that was sold at the end of the ~~current~~prior year second quarter~~. In addition~~, ~~during~~and ~~the~~a ~~first~~decrease ~~half~~in ~~of the current year, when we owned the display fixtures business,~~ revenue ~~was~~of ~~substantially lower~~approximately ~~than~~$14 ~~the~~million ~~prior year~~ due to athe ~~contract~~sale toof ~~supply~~Strawberry ~~fixtures~~Shortcake ~~to a large consumer electronics company that did not recur~~ in March of the current year.

Segment earnings decreased $14.7 million compared to the prior year. This decrease was primarily driven by the display fixtures business, due to lower sales volume, unfavorable product mix and higher operating costs during the first half of the year. As noted above, the fixtures business was sold in the current year second quarter.

Compared to the prior year, segment earnings increased $49.3 million, which was primarily due to the gain of $61.2 million recorded in connection with the sale of Strawberry Shortcake, offset by the operational impact of that sale.

Unallocated Items

Centrally incurred and managed costs are not allocated back to the operating segments. The unallocated items include interest expense for centrally-incurred debt, and domestic profit-sharing ~~expense~~ and ~~stock-based~~401(k) ~~compensation~~match expense. Unallocated items also ~~included~~include costs associated with corporate operations such as the senior management, corporate finance, legal and insurance programs.

(Dollars in thousands)	~~2015~~2016			~~2014~~2015
Interest expense	$	(3627,~~020~~201	)	$	(2736,~~363~~020	)
Profit-sharing expense		(9,180	)		(9,149	)
Profit-sharing and 401(k) match expense		(14,200	)		(13,755	)
Stock-based compensation expense		—			(13,812	)
Corporate overhead expense		(15,116	)		(36,674	)
Corporate overhead expense		(41,250	)		(53,646	)
Total Unallocated	$	(56,517	)	$	(86,449	)
Total Unallocated	$	(86,450	)	$	(103,970	)

Interest expense for the current year ~~increased~~decreased approximately $98.8 million, primarily ~~due~~attributable to ~~increased~~lower ~~borrowings~~debt levels in ~~connection~~the ~~with~~current ~~the~~year, ~~Merger~~ as ~~well~~a asresult ~~the impact~~ of ~~the~~$140 ~~credit~~million ~~facility~~of ~~amendment and term loan~~ prepayments. ~~The~~on ~~current~~our ~~year~~term ~~period~~loans ~~includes~~in ~~twelve~~the ~~months~~fourth quarter of ~~interest~~2015 onand ~~these~~the ~~increased~~first ~~borrowings~~quarter ~~while~~of the ~~prior~~current year ~~period included slightly less than seven months~~. For further information, refer to the discussion of our borrowing arrangements as disclosed in Note 11, “Debt,” to the Consolidated Financial Statements under Part II, Item 8 of this Annual Report.

~~Stock-based~~Corporate ~~compensation~~overhead expense in the current ~~prior~~ year includes ~~approximately~~income of $49.1 million offrom non-~~cash~~income ~~stock-~~based ~~compensation~~tax ~~prior~~credits toreceived ~~closing~~from the State of ~~the~~Ohio ~~Merger~~for ~~and~~ certain incentive programs made available to us in connection with the ~~impact~~relocation of our world headquarters within Ohio. See Note 4, “Other Income and Expense,” to the ~~settlement~~Consolidated Financial Statements under Part II, Item 8 of ~~stock~~this ~~options~~Annual ~~and~~Report for further information. Corporate overhead expense in the ~~cancellation~~prior oryear ~~modification~~included the gain on sale of ~~outstanding~~our ~~restricted~~display ~~stock~~fixtures business ~~units~~of $35.0 million and ~~performance~~a ~~shares~~loss ~~concurrent~~on ~~with~~disposal related to the ~~closing~~sale of our world headquarters location. In conjunction with the ~~Merger~~sale, we incurred a ~~portion~~total non-cash loss on disposal of $15.5 million, of which $2.2 million was ~~non-cash~~recorded within the Unallocated segment. ~~There~~In isaddition, noa ~~stock~~non-~~based compensation~~cash ~~subsequent~~intangible toasset ~~the~~impairment ~~closing~~charge of ~~the~~$21.9 ~~Merger~~million aswas ~~these~~recorded ~~plans~~in ~~were~~2015, ~~converted~~which ~~into~~fully ~~cash~~impaired ~~compensation~~the ~~plans.~~Clinton ~~Expense~~Cards ~~related~~tradename. toAlso, ~~these~~variable ~~plans~~compensation iswas ~~included~~approximately in$20 ~~corporate~~million ~~overhead~~less ~~expense~~in ~~for~~ the current year compared to 2015.

Corporate overhead expense in the current year includes the gain on sale of AGI In-Store of $35.0 million and a loss on disposal related to the sale of our world headquarters. During the current year, we sold our world headquarters location and incurred a total non-cash loss on disposal of $15.5 million, of which $2.2 million was recorded within the Unallocated segment. See Note 3, “Acquisitions and Dispositions,” to the Consolidated Financial Statements under Part II, Item 8 of this Annual Report for further information. A non-cash intangible asset impairment charge of $21.9 million was recorded in 2015, as indicators emerged during the period, fourth quarter holiday results in particular, that led us to adjust our future cash flow expectations. As such, as we performed our annual impairment testing of indefinite-lived intangible assets during the fourth quarter of 2015, we determined that the Clinton Cards tradename was fully impaired. The current year also includes approximately $19 million of higher variable compensation expense compared to the prior year. Corporate overhead expense in the prior year included costs related to the Merger of $17.5 million. See Note 2, “Merger,” to the Consolidated Financial Statements under Part II, Item 8 of this Annual Report for further information.

Comparison of the years ended February 28, ~~2014~~2015 and ~~2013~~2014

In ~~2014~~2015, net income was $5065.51 million compared to $4950.95 million in ~~2013~~2014.

Our results for ~~2014~~2015 and ~~2013~~2014 are summarized below:

(Dollars in thousands)	~~2014~~2015			% TotalRevenue			~~2013~~2014			% TotalRevenue
Net sales	$	1,~~941~~986,~~809~~352			98.68%	%	$	1,~~842~~941,~~544~~809			98.6%	%
Other revenue		2724,~~857~~617			1.42%	%		2627,~~195~~857			1.4%	%
Total revenue		12,~~969~~010,~~666~~969			100.0%	%		1,~~868~~969,~~739~~666			100.0%	%
Material, labor and other production costs		~~857~~882,~~227~~337			43.59%	%		~~817~~857,~~740~~227			43.85%	%
Selling, distribution and marketing expenses		~~685~~696,~~088~~543			34.86%	%		~~653~~685,~~935~~088			3534.08%	%
Administrative and general expenses		~~297~~289,~~443~~433			1514.14%	%		~~298~~297,~~569~~443			1615.01%	%
Goodwill impairment		733			0.0	%		—			0.0	%
Goodwill and other intangible assets impairment		21,924			1.1%			733			0.0%
Other operating (income) expense – net		(7,718	)		(0.4	%)		4,330			0.2	%
Other operating income – net		(23,674	)		(1.2%)			(7,718	)		(0.4%)
Operating income		~~136~~144,~~893~~406			7.02%	%		94136,~~165~~893			57.0%	%
Interest expense		2736,~~363~~020			1.48%	%		1727,~~896~~363			01.94%	%
Interest income		(~~400~~2,639	)		(0.01%)	%)		(~~471~~400	)		(0.0%)	%)
Other non-operating income		(3,296	)		(0.2	%)		(9,174	)		(0.5	%)
Other non-operating expense (income)—net		319			0.0%			(3,296	)		(0.2%)
Income before income tax expense		~~113~~110,~~226~~706			5.85%	%		85113,~~914~~226			45.68%	%
Income tax expense		6245,~~704~~599			3.2.3%	%		3562,~~996~~704			13.92%	%
Net income	$	5065,~~522~~107			23.62%	%	$	4950,~~918~~522			2.76%	%

Revenue Overview

During ~~2014~~2015, consolidated net sales were $1.9499 billion, up from $1.8494 billion in ~~2013~~2014. This 52.43%, or $9944.35 million, increase was ~~primarily~~driven ~~related~~by tohigher ~~the~~sales ~~purchase~~ of ~~Clinton~~greeting ~~Cards~~cards ~~retail operations during the second quarter~~ of ~~2013.~~approximately ~~The~~$44 ~~2014 period includes twelve months of sales through Clinton Cards retail stores~~million, ~~while~~increased ~~2013 includes~~ sales ~~for~~of ~~slightly~~gift ~~less than eight months. In total~~packaging, ~~net~~party ~~sales~~goods ~~related~~and toother ancillary ~~Clinton~~products ~~Cards~~of ~~for 2014 increased~~ approximately $9122 million, ~~compared to 2013. Also contributing to~~ the ~~increase~~favorable inimpact ~~net~~of ~~sales~~fewer inSBT ~~2014~~implementations ~~were~~during ~~higher~~the ~~sales~~year ~~in our fixtures business~~ of approximately $358 million, ofand ~~which approximately $26 million was related to a large contract obtained in~~ the ~~first~~favorable ~~quarter.~~impact ~~The~~of ~~remaining~~foreign ~~year-over-year improvement~~currency ~~was~~translation ~~due to the 2013 impairment~~ of ~~deferred costs of~~ approximately $4 million. ~~related~~These toincreases ~~the supply agreement associated with Clinton Cards’ Birthdays branded stores that~~ were ~~closed as part of the Clinton Cards bankruptcy~~ ~~administration~~partially ~~process.~~offset ~~Partially~~by ~~offsetting~~lower ~~these~~sales ~~increases~~from ~~were~~our ~~reduced~~display ~~greeting~~fixtures ~~cards~~business, ~~sales~~which ofwas ~~approximately~~sold $5during ~~million,~~the ~~lower~~second ~~sales~~quarter of ~~gift packaging~~2015, ~~party goods and other ancillary product sales~~ of approximately $329 million and ~~the~~a ~~unfavorable impact~~contract ofasset ~~foreign~~impairment ~~currency~~related ~~translation~~to ~~and~~a ~~SBT~~customer ~~implementations~~bankruptcy of approximately $174 million ~~and $5 million, respectively.~~

The contribution of each major product category as a percentage of net sales for the past two fiscal years was as follows:

	2014			2013
	2015			2014
Everyday greeting cards		4748%	%		4947%	%
Seasonal greeting cards		2425%	%		2524%	%
Gift packaging and party goods		1617%	%		1516%	%
All other products*		1310%	%		1113%	%

* The “~~all~~All other products” classification includes, among other things, stationery, ornaments, custom display fixtures, stickers, online greeting cards, other online digital products and specialty gifts.

Other revenue, primarily royalty revenue from our Strawberry Shortcake and Care Bears properties, decreased $3.3 million from $27.9 million during 2014 to $24.6 million in 2015.

Other revenue, primarily royalty revenue from our Strawberry Shortcake and Care Bears properties, increased $1.7 million from $26.2 million during 2013 to $27.9 million in 2014.

Wholesale Unit and Pricing Analysis for Greeting Cards

Unit and pricing comparatives (on a sales less returns basis) for ~~2014~~2015 and ~~2013~~2014 are summarized below:

	Increase (Decrease) From the Prior Year
	Everyday Cards						Seasonal Cards						Total Greeting Cards
	2014			2013			2014			2013			2014			2013
	2015			2014			2015			2014			2015			2014
Unit volume		(21.92%	%)		(02.39%)	%)		(13.90%	%)		(1.69%)	%		(21.67%	%)		0(2.36%)	%
Selling prices		34.16%	%		0.3.1%	%		2.1.2%	%		2.31%	%		23.85%	%		12.08%	%
Overall increase		05.18%	%		0.1%	%		04.12%	%		4.0.1%	%		05.13%	%		10.31%	%

During ~~2014~~2015, total wholesale greeting card sales less returns increased 05.13%, compared to ~~2013~~2014, with a 23.85% increase in ~~selling~~ selling prices and a 21.67% ~~decrease~~increase in unit volume. The overall increase was ~~primarily~~ driven primarily by increases in selling prices and unit volume from both our everyday and seasonal greeting cards in ~~both~~ our North American Social Expression Products ~~and~~segment. ~~our International~~Also ~~Social~~contributing ~~Expression~~to ~~Products~~the ~~segments,~~overall ~~mostly~~increase ~~offset~~were byincreases ~~decreases~~ in ~~unit~~selling ~~volume~~prices offrom everyday cards inand ~~both~~improvement ofin ~~our~~unit ~~greeting~~volume ~~card~~from ~~segments and~~ seasonal ~~greeting~~ cards in ~~our~~the International Social Expression Products segment.

Everyday card sales less returns were up 05.18%, compared to ~~2013~~2014, as a result of ~~increased~~increases in selling prices of 34.16% ~~mostly~~and ~~offset by a decline in~~ unit volume of 2 1.92%. The increase in selling ~~price~~prices ~~increase~~ was adriven ~~result~~by of general price increases ~~outpacing~~and favorable product mix within the core product line, which more than offset the continued unfavorable shift to a higher proportion of value ~~card sales~~cards. The unit volume ~~decline~~improvement was primarily driven by ~~generally~~additional ~~soft~~distribution ~~unit~~with ~~trends~~existing ~~across~~customers ~~most~~in ~~distribution channels~~the North American Social Expression Products segment.

Seasonal card sales less returns increased 04.12%, with anunit ~~increase~~volume ingrowth ~~selling prices~~ of 23.10% and aselling ~~decrease~~price inincreases ~~unit volume~~ of 1.92%. The increase in ~~selling~~unit ~~prices~~volume was ~~primarily~~attributable ~~driven~~to byour Mother’s Day, Easter and Christmas programs in both our North American Social Expression Products and International Social Expression Products segments ~~across most of our seasonal card programs~~. The ~~decline~~increase in ~~unit~~selling ~~volume~~prices was driven by our ~~International Social~~Father’s ~~Expression~~Day, ~~Products~~Graduation ~~segment~~ and ~~was~~Christmas ~~primarily~~programs ~~attributable~~in to our ~~Mother’s~~North ~~Day~~American ~~and~~Social ~~Easter~~Expression ~~programs~~Products segment.

Expense Overview

MLOPC for ~~2014~~2015 were $~~857~~882.23 million, an increase of $3925.51 million from $~~817~~857.72 million in ~~2013~~2014. As a percentage of total revenue, these costs were 43.59% in ~~2014~~ 2015 compared to 43.85% in ~~2013~~2014. The ~~retail operations we purchased from Clinton Cards in the second quarter of 2013 caused a net~~ increase inwas ~~MLOPC~~primarily ofdue ~~approximately $37 million during 2014 compared~~ to ~~2013. In addition,~~ the ~~combination~~impact of higher sales ~~volume~~ and unfavorable product mix, ~~partially~~in ~~offset~~2015 byas well ~~lower~~as ~~costs~~the ~~caused~~unfavorable animpact ~~increase~~of inforeign ~~MLOPC~~currency translation of approximately $74 million. ~~These~~Partially offsetting these increases were ~~partially~~lower ~~offset~~product bydisplay ~~the~~material ~~favorable~~costs ~~impact~~and the elimination of ~~foreign~~costs ~~currency~~related ~~translation~~to ofthe ~~approximately~~display $5fixtures ~~million.~~business that was sold in the second quarter of 2015.

SDM for ~~2014~~2015 were $~~685~~696.15 million, ~~increasing~~an increase of $3111.24 million from $~~653~~685.91 million in ~~2013~~2014. As a percentage of total revenue, these costs were 34.86% in ~~2014~~ 2015 compared to 3534.08% in ~~2013~~2014. The dollar increase was primarily driven by higher ~~expenses~~supply chain costs of approximately $563 million, ~~within our Retail Operations segment due to~~ the ~~timing~~unfavorable impact of ~~the~~foreign ~~Clinton~~currency ~~Cards~~translation ~~acquisition in the second quarter~~ of ~~2013.~~approximately ~~The~~$4 ~~2014~~million ~~period~~and ~~includes~~increased ~~twelve~~retail ~~months~~store expenses of ~~activity~~approximately ~~related~~$10 tomillion, ~~Clinton~~which ~~Cards~~included ~~retail~~approximately ~~stores~~$4 ~~while~~million ~~2013~~of ~~includes~~fixed ~~activity~~asset ~~for~~impairment ~~slightly less than eight months~~charges. ~~This~~Partially ~~increase~~offsetting ~~was~~these ~~partially~~increases ~~offset~~were by lower sales, marketing and product management expenses of approximately $134 million, and the ~~majority~~elimination of ~~which~~approximately ~~related~~$2 tomillion ~~Cardstore.com,~~of ~~lower supply chain~~ costs ofrelated ~~approximately~~to $6the ~~million~~display ~~and~~fixtures ~~the~~business ~~favorable~~that ~~impact~~was ofsold ~~foreign~~in ~~currency~~the ~~translation~~second quarter of ~~approximately $6 million~~2015.

Administrative and general expenses for 2015 were $~~297~~289.4 million ~~in 2014~~, a decrease of $18.20 million from $~~298~~297.64 million in ~~2013~~2014. ~~The~~2014 ~~decrease~~included ~~was~~costs ~~driven~~and byfees ~~lower bad~~of ~~debt expense, whereby 2013 included~~ approximately $1728 million related to ~~increased~~the ~~unsecured~~Merger ~~accounts~~(See ~~receivable~~Note ~~exposure~~2, ~~as a result of Clinton Cards being placed into administration. In addition~~“Merger,” ~~2013~~to ~~included transaction costs in connection with~~ the ~~acquisition~~Consolidated ofFinancial ~~the~~Statements ~~Clinton~~under ~~Cards~~Part ~~retail~~II, ~~operations~~Item 8 of ~~approximately~~this $7Annual ~~million~~Report ~~that~~for ~~did~~further ~~not recur in 2014~~information). Also contributing to the decrease were lower ~~legal related expenses of approximately $8 million, a year-over-year decrease in~~ costs ~~related~~in ~~to our information technology systems refresh project of approximately $5 million,~~ the ~~favorable~~AG ~~impact~~Interactive ofsegment ~~foreign currency translation~~ of approximately $13 million ~~and~~driven ~~general~~by 2014 cost savings initiatives, ofthe ~~which~~elimination ~~no items were individually significant,~~ of approximately $42 million. ~~These~~of ~~decreases were substantially offset by higher~~ costs ~~and fees~~ related to the ~~Merger~~display offixtures ~~approximately~~business ~~$21~~that ~~million~~was ~~compared~~sold toin ~~2013~~the ~~and~~second ~~higher~~quarter ~~expenses~~ of ~~approximately~~2015 $9and ~~million within our Retail Operations segment~~other ~~primarily~~general ~~due~~cost tosavings ~~the timing~~ of ~~the~~approximately ~~Clinton~~$3 ~~Cards acquisition in the second quarter of 2013~~million. ~~The~~These ~~2014~~decreases ~~period~~were ~~also~~partially ~~includes~~offset by approximately $1122 million of higher variable compensation expense ~~primarily~~ related to ~~the~~corporate ~~establishment~~bonus ofand a long-term incentive ~~program~~programs toand ~~replace~~higher ~~the~~technology ~~prior~~costs ~~stock-based~~of approximately ~~compensation~~$6 ~~programs~~million.

~~Other~~A ~~operating~~non-cash ~~(income)~~intangible ~~expense~~asset –impairment ~~net~~charge ~~was~~of $721.79 million ofwas ~~income~~recorded ~~during~~in ~~2014~~2015, ~~compared~~as toindicators ~~$4.3~~emerged ~~million of~~during ~~expense~~the inperiod, ~~2013.~~fourth ~~Included~~quarter inholiday ~~2013~~results ~~were~~in ~~expenses~~particular, ofthat ~~$2.1~~led ~~million~~us ~~related~~ to ~~the~~adjust ~~termination~~our offuture ~~certain~~cash ~~agency~~flow ~~agreements~~expectations. ~~associated~~As ~~with~~such, ~~our~~as ~~licensing~~we ~~business~~performed ~~and~~our anannual impairment oftesting ~~$8.1 million related to the senior secured debt~~ of ~~Clinton~~indefinite-lived ~~Cards~~intangible ~~that we~~assets ~~acquired~~during in the ~~first~~fourth quarter of ~~2013. In 2014~~2015, ~~based on updated estimated recovery information provided in connection with the Clinton Cards bankruptcy administration,~~ we determined ~~recorded~~that ~~adjustments to~~ the Clinton Cards ~~debt~~tradename ~~impairment~~was ~~resulting~~fully ~~in a gain totaling $4~~impaired.9 ~~million.~~

~~Interest~~Other ~~expense~~operating income was $2723.4 7 million during ~~2014,~~2015 upcompared ~~from~~to $177.9 7 million in ~~2013~~2014. The increase was driven primarily by the gain on the sale of our display fixtures business of $935.0 million, partially offset by a non-cash loss recorded upon sale of our current world headquarters location of $15.5 million. In addition, in both ~~was~~2015 ~~primarily~~and ~~attributable~~2014, tobased ~~increased~~on ~~borrowings~~updated estimated recovery information provided in connection with the ~~Merger.~~Clinton ~~For~~Cards ~~further~~bankruptcy ~~information~~administration, we recorded an impairment recovery related to the senior secured debt of Clinton Cards that we acquired in May 2012 and subsequently impaired. The recovery was $3.4 million in 2015 and $4.9 million in 2014. The 2015 recovery represents the ~~increased~~full ~~borrowings,~~recovery ~~see~~of ~~Note~~the ~~11,~~impairment. ~~“Debt,”~~The income related to the ~~Consolidated~~impairment ~~Financial~~recovery ~~Statements~~in ~~under~~2015 ~~Part~~was ~~II,~~partially ~~Item 8~~offset by other expenses of ~~this~~$2.1 ~~Annual Report~~million related to the Clinton Cards bankruptcy administration.

~~Other~~Interest ~~non-operating~~expense ~~income~~ was $336.3 0 million during ~~2014~~2015, ~~compared~~up to from $927.2 4 million in ~~2013~~2014. The ~~2014~~increase ~~period included a non-cash impairment~~ of $18.9 6 million ~~related~~was toprimarily ~~our~~attributable ~~investment in Schurman. Refer~~ to ~~Note~~increased 1,borrowings ~~“Significant~~in ~~Accounting~~connection ~~Policies,”~~with to the ~~Consolidated~~Merger ~~Financial~~as ~~Statements~~well ~~under~~as ~~Part~~the ~~II,~~impact ~~Item 8~~ of ~~this~~the ~~Annual~~credit ~~Report~~facility ~~for~~amendment ~~further~~and ~~information~~term ~~regarding~~loan ~~our investment in Schurman~~prepayments. In ~~addition,~~2015 ~~2014~~there ~~and~~were twelve ~~2013~~months ~~included~~of ~~gains~~interest ~~associated~~on ~~with~~these ~~our~~increased ~~investment~~borrowings inwhile a2014 ~~third~~included ~~party~~slightly inless ~~the~~than ~~amounts~~seven ~~of $3~~months.3 ~~million~~For ~~and~~further ~~$4.3~~information ~~million,~~related ~~respectively.~~to ~~The~~our ~~remaining~~borrowings, ~~decrease~~see ~~was~~Note ~~primarily~~11, ~~due~~“Debt,” to athe ~~year-over-year~~Consolidated ~~change~~Financial inStatements ~~foreign currency~~under ~~gains~~Part II, Item 8 of ~~$2.5~~this ~~million~~Annual Report.

~~The~~Interest ~~effective~~income ~~tax rate~~ was 55$2.4%6 ~~and~~million ~~41.9% during 2014 and 2013, respectively. The higher than statutory tax rate~~ in ~~2014 was~~2015 ~~due~~compared to ~~an increase to the valuation allowance in the amount of~~ $120.64 million ~~against~~in ~~certain~~2014. ~~net~~During ~~operating~~2015, ~~loss~~as ~~and~~part ~~foreign~~of ~~tax~~the ~~credit~~Clinton ~~carryforwards~~Cards bankruptcy ~~that~~administration, we ~~believe~~received ~~will~~a ~~expire~~cash ~~unused~~distribution ~~and~~as anpart ~~increase~~of in the ~~state~~liquidation ~~income~~process ~~tax~~that ~~expense~~included ~~due~~$2.5 tomillion ~~the receipt~~ of ~~intercompany~~interest ~~foreign~~on ~~dividends.~~our ~~The~~senior ~~valuation~~secured ~~allowance~~debt was recorded in accordance with Internal Revenue Code section 382 and 383 due to the Merger as previously disclosed. The higher than statutory tax rate in 2013 was primarily due to certain nondeductible expenses incurred as a result of ~~the~~ Clinton Cards ~~acquisition~~that aswas ~~well~~previously ~~as certain items includable as taxable income which did~~ not ~~have~~expected ~~corresponding~~to ~~book~~be ~~income amounts also as a result of the Clinton Cards transaction~~received.

Other non-operating expense (income) – net was expense of $0.3 million in 2015, compared to $3.3 million of income in 2014. Included in 2014 is a gain of $3.3 million associated with our investment in a third party.

The effective tax rate was 41.2% and 55.4% during 2015 and 2014, respectively. The higher than statutory rate in 2015 was primarily due to the surrender of certain corporate-owned life insurance policies that resulted in an increase in tax expense of $28.3 million. The increase was partially offset by the benefit of dual consolidation losses of our branches totaling $13.3 million and the benefit of the net release of valuation allowances of $4.2 million. The higher than statutory tax rate in 2014 was due to an increase of $12.6 million to the valuation allowance against certain net operating loss and foreign tax credit carryforwards that we believed at the time would expire unused and an increase in the state income tax expense due to the receipt of intercompany foreign dividends. The valuation allowance was recorded in accordance with Internal Revenue Code section 382 and 383 due to the Merger as previously disclosed.

Segment Results

North American Social Expression Products Segment

(Dollars in thousands)

~~2014~~2015

~~2013~~2014

% Change

Total revenue

1,~~253~~316,~~842~~617

1,~~245~~253,~~269~~842

05.70%

Segment earnings

~~172~~193,~~502~~176

~~160~~172,~~052~~502

712.80%

Total revenue of our North American Social Expression Products segment increased $862.68 million in ~~2014~~2015 compared to ~~2013~~2014. The increase was primarily driven by higher sales of greeting cards of approximately $40 million, increased sales of gift packaging, party goods and other ancillary products of approximately $1328 million and ~~increased~~the ~~greeting~~favorable ~~card~~impact ~~sales~~of fewer SBT implementations during the year of approximately $7 million. ~~Partially~~These ~~offsetting~~favorable ~~these~~items ~~increases~~ were partially offset by the unfavorable impact of ~~higher SBT implementations and~~ foreign currency translation of approximately $68 million and a contract asset impairment related to a customer bankruptcy of approximately $54 million~~, respectively~~.

Segment earnings increased $1220.57 million in ~~2014~~2015 compared to ~~2013~~2014. The increase was driven by the impact of higher revenues which provided approximately $751 million of additional gross margin, ~~net~~including of the ~~unfavorable~~favorable impact of ~~higher~~fewer SBT implementations of approximately $6 million,. asThis ~~well~~improvement asin aearnings ~~decrease~~was inpartially ~~sales,~~offset ~~marketing~~by ~~and~~a ~~product~~non-cash ~~management~~loss related ~~expenses~~to the sale of ~~approximately~~ ~~$13~~our ~~million~~current ~~and~~world ~~lower~~headquarters ~~costs~~location, ~~related~~of towhich ~~our~~approximately ~~information~~$13 ~~technology~~million ~~systems~~of ~~refresh~~the ~~project~~total loss of ~~approximately~~ $15.5 million. ~~These~~was ~~favorable~~recorded ~~items~~within ~~were~~the ~~partially~~North ~~offset~~American bySocial Expression Products segment, an increase in variable compensation expense ~~(as~~of ~~noted~~approximately ~~above)~~$7 million, higher technology costs of approximately $96 million and ~~the~~increased ~~unfavorable~~supply ~~impact~~chain ofcosts ~~foreign currency translation~~ of approximately $34 million.

International Social Expression Products Segment

(Dollars in thousands)	~~2014~~2015		~~2013~~2014			% Change
Total revenue	$	~~249~~257,~~790~~596	$	~~275~~249,~~861~~790			(93.51%	%)
Segment earnings (loss)		9,270		(13,428	)		N/A
Segment earnings		7,508		9,270			(19.0%)

Total revenue of our International Social Expression Products segment ~~decreased~~increased $267.18 million in ~~2014~~2015 compared ~~to 2013~~2014. The ~~decrease~~increase was primarily ~~due~~driven toby ~~lower~~higher sales of greeting cards of approximately $125 million ~~and reduced sales of gift packaging~~, ~~party~~the ~~goods~~favorable ~~and other ancillary products of approximately $11 million. In addition, foreign currency translation had an unfavorable~~ impact of ~~approximately~~fewer $8SBT ~~million~~implementations ~~for~~during ~~2014. Partially offsetting these decreases was~~ the ~~2013~~year ~~impairment~~ of ~~deferred costs of~~ approximately $41 million ~~related to the supply agreement associated with the Clinton Cards’ Birthdays stores that were closed as part of the Clinton Cards bankruptcy administration process that did not recur 2014~~ and the favorable impact of ~~lower~~foreign ~~SBT~~currency ~~implementations~~translation ~~in 2014 compared to 2013~~ of approximately $12 million.

Segment earnings ~~increased~~decreased $221.78 million ~~compared to 2013. The improvement~~ in ~~earnings~~2015 ~~was~~compared ~~primarily driven by 2013 costs of approximately $21 million related~~ to ~~Clinton Cards that do not have comparative amounts in~~ 2014. InSegment ~~the~~earnings ~~first~~were ~~quarter~~unfavorably ofimpacted ~~2013,~~by ~~Clinton~~upfront ~~Cards, a significant third-party customer at the time, was placed into administration. As a result, we incurred bad debt expense of approximately $17 million and an impairment of deferred~~ costs related to ~~the~~cost ~~supply~~savings ~~agreement~~initiatives associated with the Clinton Cards’ Birthdays stores of approximately $4 million. The 2013 period also included charges of approximately $3 million due to strategic business actions, including the divestiture of a small non-card product line and ~~the closure of~~ a ~~small~~lower ~~gift~~gross ~~wrap~~margin ~~manufacturing~~percentage ~~facility~~driven inby ~~Italy,~~lower ~~which~~seasonal ~~did~~yield ~~not recur in 2014. In 2014~~rates, ~~the~~an ~~impact~~unfavorable onpricing ~~earnings~~rate ~~from~~variance ~~decreased~~and ~~revenue~~higher ~~was substantially offset by favorable~~ product ~~mix~~content ~~as well as lower supply chain~~ costs ~~and scrap expenses of approximately $7 million and $2 million, respectively~~.

Retail Operations Segment

(Dollars in thousands)	~~2014~~2015			~~2013~~2014			% Change
Total revenue	$	~~332~~336,~~066~~860		$	~~244~~332,~~106~~066			361.04%	%
Segment (loss) earnings		(4,637	)		6,581			—
Segment loss		(35,007	)		(4,637	)		(654.9%)

~~During the second quarter of 2013, we acquired retail stores in the UK that we are operating under the “Clintons” brand. As of February 28, 2014, we were operating 396 stores.~~ Total revenue inof our Retail Operations segment increased ~~approximately~~ $884.8 million, ~~which~~in ~~includes~~2015 ~~approximately~~compared ~~$91~~to ~~million of higher sales less the unfavorable impact from foreign exchange translation of approximately $3 million~~2014. The ~~revenue~~ increase was ~~due~~driven toby the impact ~~timing~~ of ~~the~~favorable ~~Clinton~~foreign ~~Cards~~exchange ~~acquisition,~~translation ~~whereby the operating results~~ of ~~the~~approximately ~~Retail~~$10 ~~Operations segment for the year ended February 28, 2013 included slightly less than eight months of activity compared to a full twelve months during 2014~~million. During ~~the comparable eight month period in 2014~~2015, net sales at stores open one year or more were down approximately 2.64% compared to ~~2013. Start-up and transitional costs related to the actions taken to execute our strategy to stabilize and improve the profitability of the stores acquired totaled $1.3 million and $7.7 million in~~ 2014 ~~and 2013, respectively~~. ~~The retail operations are consolidated on a one-month lag corresponding with a fiscal year-end of February 1 for fiscal 2014.~~

Segment earnings decreased $30.4 million in 2015 compared to 2014. The lower segment earnings were the result of lower sales (excluding the impact of foreign exchange translation), lower gross margins and higher store operating costs, as well as fixed asset impairment charges of approximately $4 million. The lower gross margins were the result of increased promotional pricing activities and increased inventory shrink expense. The majority of the higher store operating costs was the result of new store openings. While we were disappointed with 2015’s operating results, we continue to adjust our strategies to better position ourselves within the very competitive UK retail environment and we remain committed to achieving the multi-year turnaround of the business.

AG Interactive Segment


(Dollars in thousands)	2015		2014		% Change
Total revenue	$	58,995	$	61,084		(3.4%)
Segment earnings		21,668		15,540		39.4%

Total revenue of our AG Interactive segment decreased $2.1 million in 2015 compared to 2014. The decrease in revenue was driven primarily by lower subscription revenue. As of February 28, 2015, AG Interactive had approximately 3.5 million online paid subscriptions as compared to approximately 3.7 million at February 28, 2014.

Despite the lower revenue, segment earnings increased $6.1 million in 2015. The earnings improvement was the result of significant cost savings programs initiated in 2014 that have driven costs lower in most functional areas of the business.

AGNon-reportable ~~Interactive~~ Segment

(Dollars in thousands)

~~2014~~2015

~~2013~~2014

% Change

Total revenue

6140,~~084~~901

6472,~~440~~884

(543.29%)

Segment earnings

159,~~540~~810

1624,~~465~~521

(560.60%)

Total revenue offrom our AGNon-reportable ~~Interactive~~ segment decreased $332.40 million in ~~2014~~2015 compared to ~~2013~~2014. ~~The~~Approximately ~~decrease~~$29 inmillion ~~revenue was~~of ~~driven~~the ~~primarily~~decrease byis ~~lower~~related ~~advertising~~to ~~revenue~~the ~~and~~display ~~lower~~fixtures ~~subscription~~business ~~revenue~~that ~~related~~was tosold at the ~~disposition~~end of athe ~~minor~~second ~~photo~~quarter ~~sharing~~of ~~business~~2015. inIn addition, during the ~~prior~~first ~~fiscal~~half ~~year.~~of At2015, ~~the~~when ~~end~~we ofowned ~~2014~~the ~~and~~display ~~2013~~fixtures business, AGrevenue ~~Interactive~~was ~~had~~substantially ~~approximately~~lower ~~3.7 million~~than ~~online~~2014 due ~~paid~~to ~~subscriptions~~a contract to supply fixtures to a large consumer electronics company that did not recur in 2015.

Segment earnings decreased $014.97 million in ~~2014~~ 2015 compared to ~~2013,~~2014. ~~primarily~~This ~~due~~decrease towas ~~the~~primarily ~~2013~~driven ~~gain~~by ~~recognized in connection with~~ the ~~disposition~~ ofdisplay afixtures ~~minor photo sharing~~ business, ~~that~~due ~~did~~to ~~not~~lower ~~recur~~sales involume, ~~the~~unfavorable ~~current~~product ~~period~~mix and ~~severance~~higher ~~expense~~operating ~~incurred~~costs induring the ~~current~~first ~~year~~half ~~third~~of ~~quarter~~2015. ~~These~~As ~~decreases~~noted inabove, ~~earnings and~~ the ~~impact~~fixtures ofbusiness ~~lower~~was ~~revenue~~sold ~~were~~in ~~substantially offset by overall~~the ~~cost~~second ~~savings~~quarter ~~across most functional areas~~ of ~~the business~~2015.

Non-reportable Segments

(Dollars in thousands)	2014		2013		% Change
Total revenue	$	72,884	$	39,063		86.6	%
Segment earnings		24,521		6,586		272.3	%

Total revenue from our Non-reportable segment increased $33.8 million in 2014 compared to 2013. This increase in revenue was driven primarily by an approximately $35 million increase from our fixtures business, which obtained and completed a $26 million contract to supply fixtures to a large consumer electronics company during 2014.

Segment earnings increased $17.9 million in 2014 compared to 2013. About eighty percent of the increase was due to the impact of the higher revenue from the fixtures business. The remaining improvement was from our licensing business primarily due to cost savings initiatives during 2014.

Unallocated Items

Centrally incurred and managed costs are not allocated back to the operating segments. The unallocated items include interest expense for centrally-incurred debt, domestic profit-sharing and 401(k) match expense and stock-based compensation expense. Unallocated items also ~~included~~include costs associated with corporate operations such as the senior management, corporate finance, legal and insurance programs.

(Dollars in thousands)	~~2014~~2015			~~2013~~2014
Interest expense	$	(2736,~~363~~020	)	$	(1727,~~896~~363	)
Profit-sharing expense		(9,149	)		(7,536	)
Profit-sharing and 401(k) match expense		(13,755	)		(14,219	)
Stock-based compensation expense		~~(13,812~~—	)		(1013,~~743~~812	)
Corporate overhead expense		(5336,~~646~~674	)		(5448,~~167~~576	)
Total Unallocated	$	(~~103~~86,~~970~~449	)	$	(90103,~~342~~970	)

Interest expense for ~~2014~~2015 increased approximately $9 million ~~compared to 2013~~, primarily due to increased borrowings in connection with the Merger. ~~For~~as ~~further~~well ~~information,~~as ~~refer to~~ the ~~discussion~~impact of ~~our borrowing arrangements as disclosed in Note 11, “Debt,” to~~ the ~~Consolidated~~credit ~~Financial~~facility ~~Statements~~amendment ~~under~~and ~~Part~~term ~~II,~~loan ~~Item 8 of this Annual Report~~prepayments. In ~~2013, corporate~~2015 ~~overhead~~there ~~expense~~are ~~included~~twelve ~~legal~~months ~~and advisory fees~~ of ~~approximately~~interest $7 million related to the Clinton Cards transaction, an impairment of approximately $8 million related to the senior secured debt of Clinton Cards and higher legal expenses of approximately $8 million primarily related to two class action lawsuits involving corporate-owned life insurance policies. The 2014 period included an adjustment to the Clinton Cards debt impairment, based on ~~current~~these ~~estimated~~increased ~~recovery information~~borrowings ~~provided~~while ~~in connection with the Clinton Cards bankruptcy administration, which resulted in a gain of approximately $5 million and higher expenses related to the Merger of approximately $21 million. The~~ 2014 ~~period also~~ included ~~a non-cash~~slightly ~~impairment~~less ofthan ~~approximately~~seven ~~$2 million related to our investment in Schurman and a non-cash loss of approximately $2 million in connection with the freeze to the accrued benefit of the Supplemental Executive Retirement Plan~~months. For ~~2014~~further information, ~~stock-based~~ ~~compensation~~refer ~~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,~~discussion ~~a portion~~ of ~~which~~our isborrowing ~~non-cash.~~arrangements ~~There is no stock-based compensation subsequent to the Merger,~~ as ~~these~~disclosed ~~plans~~in ~~were converted into cash compensation plans at the time of the Merger. Refer to~~ Note 211, “~~Merger~~Debt,” to the Consolidated Financial Statements under Part II, Item 8 of this Annual Report ~~for further information~~.

Stock-based compensation expense in 2014 includes approximately $4 million of non-cash stock-based compensation prior to closing of 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 closing of the Merger, a portion of which was non-cash. There is no stock-based compensation subsequent to the closing of the Merger as these plans were converted into cash compensation plans. Expense related to these plans is included in corporate overhead expense for 2015.

Corporate overhead expense in 2015 includes the gain on sale of our display fixtures business of $35.0 million and a loss on disposal related to the sale of our world headquarters. During 2015, we sold our world headquarters location and incurred a total non-cash loss on disposal of $15.5 million, of which $2.2 million was recorded within the Unallocated segment. See Note 3, “Acquisitions and Dispositions,” to the Consolidated Financial Statements under Part II, Item 8 of this Annual Report for further information. A non-cash intangible asset impairment charge of $21.9 million was recorded in 2015, as indicators emerged during the period, fourth quarter holiday results in particular, that led us to adjust our future cash flow expectations. As such, as we performed our annual impairment testing of indefinite-lived intangible assets during the fourth quarter of 2015, we determined that the Clinton Cards tradename was fully impaired. In 2015 there is also approximately $19 million of higher variable compensation expense compared to 2014. Corporate overhead expense in 2014 included costs related to the Merger of $17.5 million. See Note 2, “Merger,” to the Consolidated Financial Statements under Part II, Item 8 of this Annual Report for further information.

Liquidity and Capital Resources

Operating Activities

During the year, cash flow from operating activities provided cash of $~~132~~127.74 million compared to $~~160~~130.14 million in ~~2014~~2015, a decrease of $273.40 million. Cash flow from operating activities for ~~2014~~2015 compared to ~~2013~~2014 decreased by $229.7 million from $~~162~~160.81 million in ~~2013~~2014.

Accounts receivable, net of the effect of acquisitions and dispositions, was a ~~use~~source of cash of $134.20 million in ~~2015~~2016 compared to a ~~source~~use of cash of $813.42 million in ~~2014~~2015 and a ~~use~~source of cash of $9.8.4 million in ~~2013~~2014. As a percentage of ~~the~~net ~~prior~~sales ~~twelve~~for ~~months’~~the ~~net~~years ~~sales~~then ended, net accounts receivable was 5.0% and 5.2% at February 2829, ~~2015~~2016 ~~compared~~and ~~to 5.0% at~~ February 28, ~~2014~~2015, respectively. The year-over-year fluctuations occurred primarily within our North American Social Expression Products and International Social Expression Products ~~segment~~segments and were primarily due to the timing of collections from, or credits issued to, certain customers occurring in a different pattern in the current period compared to the prior periods.

Inventories, net of the effect of acquisitions and dispositions, were a ~~use~~ source of cash of $2012.34 million in ~~2015~~2016 compared to ~~$6.8~~ ~~million~~uses of cash in ~~2014~~2015 and 2014 of $3120.63 million inand ~~2013~~$6.8 million, respectively. The ~~use~~source of cash in 2016 was primarily the result of an inventory efficiency initiative that reduced warehouse inventory levels within our North American Social Expression Products segment. In 2015, the use of cash was primarily due to our International Social Expressions and Retail Operations segments that grew inventory by approximately $8 million and $5 million, respectively. In addition, inventory increased within our display fixtures business by approximately $8 million prior to the sale of that business in the second quarter of ~~the current year~~2015. In 2014, the use of cash was driven primarily by our Retail Operations segment that grew inventory by approximately $13 million., ~~This was~~ partially offset by lower inventory levels within our North American Social Expression Products segment. ~~In 2013, the use of cash was driven primarily by our Retail Operations segment that grew inventory by approximately $27 million from its acquisition in June 2012 to February 2013.~~

~~Other~~Deferred ~~current~~costs ~~assets,~~– net ofgenerally ~~the~~represents ~~effect~~payments ~~of acquisitions~~under ~~and~~agreements ~~dispositions,~~with ~~were~~retailers anet ~~use~~ of ~~cash~~the related amortization of $0those payments.7 ~~million~~During ~~during 2015~~2016, amortization ~~compared~~exceeded topayments aby ~~source of cash of~~ $1612.19 million. inPayments ~~2014~~exceeded ~~and~~amortization ain ~~use~~2015 ofand ~~cash~~2014 ofby $2310.41 million inand ~~2013~~$22.2 ~~The~~million, ~~source~~respectively. ofSee ~~cash~~Note in10, ~~2014~~“Deferred ~~was~~Costs,” ~~primarily due~~ to ~~lower~~the ~~prepaid~~Consolidated ~~rents within~~Financial ~~our~~Statements ~~Retail~~under ~~Operations~~Part ~~segment~~II, Item 8 ~~and~~of ~~lower~~this ~~prepaid~~Annual ~~insurance~~Report ~~within~~for ~~our~~further ~~North~~detail ~~American Social Expressions segment. The use~~ of ~~cash~~deferred incosts ~~2013~~related ~~was~~to ~~driven~~customer ~~primarily by prepaid rents within our new Retail Operations segment that was not present in prior years~~agreements.

~~Deferred~~Accounts ~~costs~~payable –and other liabilities, net ~~generally~~of ~~represents~~the effect ~~payments~~of ~~under~~acquisitions ~~agreements~~and ~~with~~dispositions, ~~retailers~~were ~~net~~a use of ~~the~~cash ~~related~~of ~~amortization~~$41.3 million in 2016, compared to a source of ~~those~~cash ~~payments~~of $45. ~~During~~4 million in 2015, ~~payments~~and ~~exceeded~~a ~~amortization~~source byof cash of $102.10 million. ~~During~~in 2014,. The change in cash usage from a source in 2015 to a use in 2016 was attributable to higher annual and long-term variable compensation payments ~~exceeded~~during ~~amortization~~the bycurrent ~~$22.2~~year ~~million.~~compared ~~During~~to ~~2013~~the same period in the prior year, ~~amortization~~an ~~exceeded~~increase in accounts payable payments byin ~~$27.1~~our ~~million.~~North ~~See~~American ~~Note~~Social ~~10,~~Expression ~~“Deferred~~Products ~~Costs,”~~segment due to normal year-over-year timing of business transactions, and lower accounts payable balance in our International Social Expression Products segment as a result of the ~~Consolidated~~cessation of manufacturing operations in the current year. The 2015 growth in ~~Financial~~accounts ~~Statements~~payable ~~under~~and ~~Part~~other IIliabilities compared to 2014, ~~Item 8~~and ofthus ~~this~~an ~~Annual~~increase ~~Report~~in ~~for~~cash ~~further~~flow, ~~detail~~was ofpartially ~~deferred~~due ~~costs~~to increased accruals related to ~~customer~~our ~~agreements~~annual and long-term variable compensation programs, as well as normal year-over-year timing of business transactions and related payments.

~~Accounts payable~~Investing ~~and~~Activities other liabilities, net of the effect of acquisitions and dispositions, were a source of cash of $45.4 million in 2015, compared to $2.0 million in 2014 and $58.6 million in 2013. The 2015 growth in accounts payable and other liabilities, and thus an increase in cash flow, was partially due to increased accruals related to our annual and long-term variable compensation programs and partially due to normal year-over-year timing of business transactions and related payments. The 2013 increase in accounts payable and other liabilities was primarily due to our new Retail Operations segment as well as activities related to our information technology systems refresh project and other strategic projects.

Investing activities provided cash of $38.2 million compared to using cash of $16.7 million and $32.7 million in 2015 and 2014, respectively. The current year includes proceeds of $105.0 received from the sale of Strawberry Shortcake and proceeds of $24.1 million received from the surrender of certain corporate-owned life insurance policies. These cash inflows were partially offset by cash paid for capital expenditures of $86.0 million, cash paid for acquired character property rights of $2.8 million, and a payment of $3.2 million related to the final working capital adjustments made in connection with the sale of our display fixtures business.

In 2015, proceeds were received from the sale of our display fixtures business and the sale of our current world headquarters of $73.7 million and $13.5 million, respectively. In addition, we received cash proceeds of $9.9 million from H L & L related to the sale of certain assets previously purchased by us for the new world headquarters, $11.9 million from the Clinton Cards bankruptcy administration, and $2.4 million from the surrender

~~Investing~~ of ~~Activities~~certain corporate-owned life insurance policies. Partially offsetting these cash inflows were cash payments of $91.2 million and $37.7 million for capital expenditures and acquired character property rights, respectively. The increase in capital expenditures compared to 2014 related primarily to increased investments within our Retail Operations segment, the purchase of a new building in the UK within our International Social Expression Products segment and the land related to our new world headquarters.

~~Investing~~The ~~activities~~use ~~used $19.1 million~~ of cash induring ~~2015 compared to $32.7 million in~~ 2014 ~~and~~was ~~$163.2~~primarily ~~million~~driven inby ~~2013.~~cash ~~The~~payments ~~current year includes proceeds received from the sale~~ of ~~AGI In-Store and the sale of our current world headquarters of~~ $7354.71 million for ~~and~~capital ~~$13.5 million~~expenditures, ~~respectively.~~partially Inoffset ~~addition,~~by the ~~current~~receipt ~~year~~of ~~includes~~a ~~proceeds~~cash ~~received~~distribution ~~from H L & L~~ of $912.91 million related to ~~the~~our ~~sale~~investment ~~of certain~~in ~~assets~~a ~~previously~~third ~~purchased~~party byand ~~us related to the new world headquarters. The current year also includes~~ proceeds ~~from Clinton Cards administration~~ of $117.96 million. ~~Partially~~from offsetting these cash inflows was cash paid for capital expenditures of $91.2 million and cash paid for acquired character property rights of $37.7 million. The increase in capital expenditures compared to 2014 related primarily to increased investments within our Retail Operations segment, the ~~purchase of~~Clinton aCards ~~new~~bankruptcy ~~building in the UK within our International Social Expressions Product segment and land related to our new world headquarters~~administration.

The use of cash during 2014 was primarily driven by $54.1 million of cash paid for capital expenditures. The decrease in capital expenditures compared to 2013 related primarily to a decrease in assets acquired in connection with our information technology systems refresh project and machinery and equipment purchased for our card-producing facilities. Additionally, during 2014 we received a cash distribution of $12.1 million related to our investment in a third party and proceeds of $7.6 million from the Clinton Cards bankruptcy administration.

The use of cash during 2013 was primarily related to cash outlays of $114.1 million associated with capital expenditures. Capital expenditures for 2013 related primarily to assets acquired in connection with our information technology systems refresh project and investments in our new Retail Operations segment. In addition, during 2013 we used $56.6 million of cash to acquire all of the outstanding senior secured debt of Clinton Cards.

Financing Activities

Financing activities used $~~129~~103.3 9 million of cash during ~~2015~~2016 compared to $~~153~~129.03 million in ~~2014~~2015 and $42153.0 million in ~~2013~~2014. The primary use of cash in each of the current ~~year~~and ~~was~~prior year related to scheduled quarterly payments and voluntary prepayments on the term loan, ofwhich totaled $65.0 million and $90.0 million in 2016 and 2015, respectively. In addition, we paid cash dividends of $34.6 million in 2016 and $38.1 million during 2015.

The ~~primary~~ use of cash in 2014 was inprimarily ~~connection~~attributable ~~with~~to activities ~~related~~necessary to effect the Merger. These activities included net borrowings of $264.5 million under our new credit agreement, ~~net~~ ~~of repayments and debt issuance costs, which provided cash of $264.5 million,~~ a contribution of $240.0 million from our parent company, Century Intermediate Holding Company (“Parent”), and ~~payment of~~ cash ofpayments totaling $568.3 million to complete the Merger and cancel outstanding shares. In addition, we paid cash dividends of $85.0 million, of which $9.6 million was paid to shareholders prior to the Merger and $75.4 million was paid to Parent after the Merger.

The 2013 use of cash primarily related to share repurchases and dividend payments. We paid $81.0 million to repurchase approximately 5.3 million Class A common shares under our repurchase programs during 2013, which included $2.2 million of cash settlements related to the repurchase of approximately 0.1 million Class A common shares that were initiated during 2012. In addition, we paid cash dividends of $19.9 million during 2013. Partially offsetting these uses of cash, were borrowings under our credit agreement, which provided $61.2 million of cash during 2013.

Credit Sources

Substantial credit sources are available to us. In total, we had available sources of credit of approximately $~~550~~485 million at February 2829, ~~2015~~2016, which included $~~250~~185 million outstanding on our term loan facility, a $250 million revolving credit facility and a $50 million accounts receivable securitization facility, of which $~~268~~273.05 million in the aggregate was unused as of February 2829, ~~2015~~2016. Borrowings under the accounts receivable securitization facility are limited based on our eligible receivables outstanding. At February 2829, ~~2015~~2016, we had ~~$4.3~~no ~~million of~~ borrowings outstanding under ~~our~~the revolving credit facility ~~and~~or ~~we had no borrowings outstanding under~~ the accounts receivable securitization facility. We had, in the aggregate, $2726.75 million outstanding under letters of credit, which reduced the total credit availability thereunder as of February 2829, ~~2015~~2016.

For further information, refer to the discussion of our borrowing arrangements as disclosed in Note 11, “Debt,” to the Consolidated Financial Statements under Part II, Item 8 of this Annual Report.

Credit Facilities

In connection with the closing of the Merger, on August 9, 2013, we entered into a $600 million secured credit agreement (“Credit Agreement”), which provides for a $350 million term loan facility (“Term Loan Facility”) and a $250 million revolving credit facility (“Revolving Credit Facility” and, together with the Term Loan Facility, the “Credit Facilities”). The Term Loan Facility was fully drawn on August 9, 2013, the effective date of the Merger (“Merger Date”). We issued the Term Loan Facility at a discount of $10.8 million. The Term Loan Facility requires us to make quarterly payments of $5 million through May 31, 2019 and a final payment of $235 million on August 9, 2019. Voluntary prepayments without penalty or premium are permitted. During 2016 and 2015 we made voluntary prepayments of $65 million and $75 million, respectively, on the Term Loan Facility, thereby eliminating all future payments prior to this facility’s due date in 2020. We may elect to increase the commitments under each of the Term Loan Facility and the Revolving Credit Facility up to an aggregate amount of $150 million. The proceeds of the term loans and the revolving loans borrowed on the Merger Date were used to fund a portion of the Merger consideration and pay fees and expenses associated therewith. Revolving loans borrowed under the Credit Agreement after the Merger Date were used for working capital and general corporate purposes.

federal income tax purposes, (ii) to make a one-time restricted payment of up to $50 million to Parent and recurring restricted payments to enable the payment of current interest on the PIK Notes (as defined in the “Capital Deployment and Investments” section below), and (iii) to make certain additional capital expenditures each year primarily related to the our information systems refresh project. The Credit Agreement ~~Facilities~~was further amended on September 5, 2014. This amendment modified the Credit Agreement to among other things (i) reduce the interest rates applicable to the term loan and revolving loans, (ii) eliminate the London Interbank Offered Rate (“LIBOR”) floor interest rate used in the determination of interest charged on Eurodollar revolving loans, (iii) reduce the commitment fee applicable to unused revolving commitments and (iv) reset the usage term of the general restricted payment basket with effect from September 5, 2014. As a result of this amendment, certain changes in the syndicated lending group and the voluntary prepayments made on the term loan facility, we expensed $2.8 million of unamortized financing fees and issuance costs in 2015. An additional $1.9 million was expensed in the current year as a result of the voluntary prepayments.

In connection with the closing of the Merger, on August 9, 2013, we entered into a $600 million secured credit agreement (“Credit Agreement”), which provides for a $350 million term loan facility (“Term Loan Facility”) and a $250 million revolving credit facility (“Revolving Credit Facility” and, together with the Term Loan Facility, the “Credit Facilities”). The Term Loan Facility was fully drawn on August 9, 2013, the effective date of the Merger. We issued the Term Loan Facility at a discount of $10.8 million. The Term Loan Facility requires us to make quarterly payments of $5 million through May, 31, 2019 and a final payment of $235 million on August 9, 2019. Voluntary prepayments without penalty or premium are permitted. During 2015 the Corporation made voluntary prepayments of $75 million on the Term Loan Facility, thereby postponing the next quarterly installment payment to November 30, 2018. We may elect to increase the commitments under each of the Term Loan Facility and the Revolving Credit Facility up to an aggregate amount of $150 million. The proceeds of the term loans and the revolving loans borrowed on the Merger Date were used to fund a portion of the Merger consideration and pay fees and expenses associated therewith. Revolving loans borrowed under the Credit Agreement after the Merger Date were used for working capital and general corporate purposes. Subsequent to year-end, in March 2015, the Corporation made additional prepayments of $65 million on the Term Loan Facility.

On January 24, 2014, we amended the Credit Agreement to among other things, permit (i) specified corporate elections and tax distributions associated with a conversion from a “C corporation” to an “S corporation’ for U.S. federal income tax purposes, (ii) to make a one-time restricted payment of up to $50 million to Parent and recurring restricted payments to enable the payment of current interest on the PIK Notes (as defined in the “Capital Deployment and Investments” section below), and (iii) to make certain additional capital expenditures each year primarily related to the our information systems refresh project. The Credit Agreement was further amended on September 5, 2014. This amendment modified the Credit Agreement to among other things (i) reduce the interest rates applicable to the term loan and revolving loans, (ii) eliminate the London Interbank Offered Rate (“LIBOR”) floor interest rate used in the determination of interest charged on Eurodollar revolving loans, (iii) reduce the commitment fee applicable to unused revolving commitments and (iv) reset the usage term of the general restricted payment basket with effect from September 5, 2014. As a result of this amendment, certain changes in the syndicated lending group and voluntary prepayments on the term loan facility, we expensed $2.8 million of unamortized financing fees.

The obligations under our Credit Agreement are guaranteed by Parent and our material domestic subsidiaries and are secured by substantially all of our assets and the guarantors.

The interest rate per annum applicable to the loans under the Credit Facilities are, at our election, equal to either (i) the base rate plus the applicable margin or (ii) the relevant adjusted Eurodollar rate for an interest period of one, two, three or six months, at our election, plus the applicable margin.

The Credit Agreement contains certain customary covenants, including covenants that limit our ability and the ability of our subsidiaries and the Parent to, among other things, incur or suffer to exist certain liens; make investments; enter into consolidations, mergers, acquisitions and sales of assets; incur or guarantee additional indebtedness; make distributions; enter into agreements that restrict the ability to incur liens or make distributions; and engage in transactions with affiliates. In addition, the Credit Agreement contains financial covenants that require us to maintain a total leverage ratio and interest coverage ratio in accordance with the limits set forth therein.

Accounts Receivable Facility

We are also a party to an accounts receivable facility that provides funding of up to $50 million, under which there were no borrowings outstanding as of February 2829, ~~2015~~2016 and ~~2014~~February 28, 2015.

Under the terms of the accounts receivable facility, we sell accounts receivable to AGC Funding Corporation (our wholly-owned, consolidated subsidiary), which in turn sells participating interests in eligible accounts receivable to third party financial institutions as part of a process that provides us funding similar to a revolving credit facility.

37The accounts receivable facility has a scheduled termination date of July 27, 2016 and then must be renewed annually thereafter. Borrowings on the accounts receivable facility typically bear interest based on the one-month LIBOR plus 40 basis points.

The accounts receivable facility has a scheduled termination date of August 7, 2015 and then must be renewed annually thereafter. Borrowings on the accounts receivable facility typically bear interest based on the one-month LIBOR plus 40 basis points.

AGC Funding Corporation also pays an annual facility fee of 60 basis points on the commitment of the accounts receivable securitization facility and customary administrative fees on letters of credit that have been issued. Funding under the facility may be used for working capital, general corporate purposes and the issuance of letters of credit.

The accounts receivable facility contains representations, warranties, covenants and indemnities customary for facilities of this type, including our obligation to maintain the same consolidated leverage ratio as it is required to maintain under our Credit Agreement.

7.375% Senior Notes Due 2021

On November 30, 2011, we closed a public offering of $225 million aggregate principal amount of 7.375% senior notes due 2021 (the “2021 Senior Notes”). The net proceeds from this offering were used to redeem other existing debt.

The 2021 Senior Notes will mature on December 1, 2021 and bear interest at a fixed rate of 7.375% per year. The 2021 Senior Notes constitute our general unsecured senior obligations. The 2021 Senior Notes rank senior in right of payment to all our future obligations that are, by their terms, expressly subordinated in right of payment to the 2021 Senior Notes and pari passu in right of payment with all our existing and future unsecured obligations that are not so subordinated. The 2021 Senior Notes are effectively subordinated to our secured indebtedness, including borrowings under the Credit Facilities described above, to the extent of the value of the assets securing such indebtedness. The 2021 Senior Notes also contain certain restrictive covenants that are customary for similar credit arrangements, including covenants that limit our ability to incur additional debt; declare or pay dividends; make distributions on or repurchase or redeem capital stock; make certain investments; enter into transactions with affiliates; grant or permit liens; sell assets; enter into sale and leaseback transactions; and consolidate, merge or sell all or substantially all of our assets. These restrictions are subject to customary baskets and financial covenant tests.

~~At February 28,~~37 ~~2015, the Corporation was in compliance with the financial covenants under its borrowing agreements described above.~~

of payment to all our future obligations that are, by their terms, expressly subordinated in right of payment to the 2021 Senior Notes and pari passu in right of payment with all our existing and future unsecured obligations that are not so subordinated. The 2021 Senior Notes are effectively subordinated to our secured indebtedness, including borrowings under the Credit Facilities described above, to the extent of the value of the assets securing such indebtedness. The 2021 Senior Notes also contain certain restrictive covenants that are customary for similar credit arrangements, including covenants that limit our ability to incur additional debt; declare or pay dividends; make distributions on or repurchase or redeem capital stock; make certain investments; enter into transactions with affiliates; grant or permit liens; sell assets; enter into sale and leaseback transactions; and consolidate, merge or sell all or substantially all of our assets. These restrictions are subject to customary baskets and financial covenant tests.

At February 29, 2016, we were in compliance with the financial covenants under our borrowing agreements described above.

Capital Deployment and Investments

On February 10, 2014, Century Intermediate Holding Company 2 (“CIHC2”), an indirect parent of American Greetings, issued $285 million aggregate principal amount of 9.75750%/10.50500% Senior PIK Toggle Notes due 2019 (the “PIK Notes”). Excluding the first and last interest payment periods, which must be paid in cash, CIHC2 may elect to either accrue or pay cash interest on the PIK Notes. The PIK Notes carry a cash interest rate of 9.75750%. Prior to the payment of interest by CIHC2, it is expected that we will provide CIHC2 with the cash flow for CIHC2 to pay interest on the PIK Notes. Assuming interest is paid regularly in cash, rather than accrued, the annual cash required to pay the interest is expected to be approximately $27.8 million while the entire issuance of PIK Notes are outstanding. For further information, refer to the discussion of the PIK Notes as disclosed in “Transactions with Parent Companies and Other Affiliated Companies” in Note 18, “Related Party Information,” to the Consolidated Financial Statements under Part II, Item 8 of this Annual Report on Form 10-K.

Throughout fiscal ~~2016~~2017 and thereafter, we will continue to consider all options for capital deployment including growth opportunities, acquisitions and other investments in third parties, expanding customer relationships, expenditures or investments related to our current product leadership initiatives or other future strategic initiatives, capital expenditures, the information technology systems refresh project, paying down debt, paying dividends and, as appropriate, preserving cash. Our future operating cash flow and borrowing availability under our credit agreement and our accounts receivable securitization facility are expected to meet these and other currently anticipated funding requirements. The seasonal nature of our business results in peak working capital requirements that may be financed through short-term borrowings when cash on hand is insufficient.

Over the next several years we expect to allocate resources, including capital, to refresh our information technology systems by modernizing our systems, redesigning and deploying new processes, and evolving new organization structures, all of which are intended to drive efficiencies within the business and add new capabilities. Amounts that we spend could be material in any fiscal year and over the life of the project. During 2016, we spent approximately $53 million, including capital of approximately $43 million and expense of approximately $10 million, on these information technology systems. We have recently completed the blueprint phase of the next segment of the project, and in doing so, determined that due to the unique nature of our business processes and the intricacies of integrating the new systems with our legacy systems, the complexity of the project is greater than originally expected. As a result, the scope and overall cost of this segment of the project has substantially increased when compared to earlier expectations. Based on the current scope of the project, we presently expect to spend at least an additional $195 million on these information technology systems, the majority of which we expect will be capital expenditures. We believe these investments are important to our business, help us drive further efficiencies and add new capabilities; however, there can be no assurance that we will not spend more or less than $195 million, or that we will achieve the anticipated efficiencies or any cost savings.

Over the next several years, we expect to allocate resources, including capital, to refresh our information technology systems by modernizing our systems, redesigning and deploying new processes, and evolving new organization structures, all of which are intended to drive efficiencies within the business and add new capabilities. Amounts that we spend could be material in any fiscal year and over the life of the project. The total amount spent through fiscal 2014 on this project was approximately $109 million. During 2015, we spent approximately $23 million, including capital of approximately $17 million and expense of approximately $6 million, on these information technology systems. Based on the current scope of the project, we currently expect to spend approximately $190 million on these information technology systems over the remaining life of the project, the majority of which we expect will be capital expenditures. We believe these investments are important to our business, help us drive further efficiencies and add new capabilities; however, there can be no assurance that we will not spend more or less than $190 million over the remaining life of the project, or that we will achieve the anticipated efficiencies or any cost savings.

Contractual Obligations

The following table presents our contractual obligations and commitments to make future payments as of February 2829, ~~2015~~2016:

Payment Due by Period as of February 28, 2015

Payment Due by Period as of February 29, 2016

(Dollars in thousands)

~~2016~~2017

~~2017~~2018

~~2018~~2019

~~2019~~2020

~~2020~~2021

Thereafter

Total

Long-term debt

—

14185,~~300~~000

~~240,000~~—

225,181

~~479~~410,~~481~~181

Leases (1)

6562,~~247~~824

6861,~~840~~053

6253,~~449~~355

5047,~~933~~594

4442,~~284~~135

~~201~~174,~~788~~294

~~493~~441,~~541~~255

Commitments under customer agreements

5947,~~018~~142

3442,~~465~~104

3436,~~481~~177

34,~~101~~054

133,~~080~~521

—

~~163~~192,~~145~~998

Commitments under royalty agreements

1219,~~654~~199

1220,~~119~~068

611,~~996~~942

~~675~~4,636

~~675~~4,129

~~169~~7,921

3367,~~288~~895

Interest payments

24,~~376~~615

23,~~151~~562

2322,~~133~~937

2219,~~485~~187

1916,~~317~~605

3316,~~281~~677

~~145~~123,~~743~~583

Severance

32,~~266~~658

~~1,037~~821

—

43,~~303~~479

Commitments under purchase agreements (2)

3641,~~948~~500

3644,~~000~~500

3944,~~000~~500

3922,~~000~~161

~~19,500~~—

—

~~170~~152,~~448~~661

~~201~~197,~~509~~938

~~175~~192,~~612~~108

~~166~~168,~~059~~911

~~161~~312,~~494~~632

~~324~~96,~~856~~390

~~460~~424,~~419~~073

1,~~489~~392,~~949~~052

(1) Approximately $42 million of the lease commitments in the table above relate to retail stores acquired by Schurman that are being subleased to Schurman. In connection with our acquisition of Clinton Cards, the number of stores that we are operating as of February 2829, ~~2015~~2016, is ~~412~~397. The estimated future minimum rental payments for noncancelable leases related to these stores is approximately $~~326~~264 million. Also included in the lease commitments is approximately $~~142~~159 million of estimated future minimum rental payments related to the new world headquarters building.

(2) In connection with the sale of ~~AGI~~our ~~In-Store~~display fixtures business, effective August 29, 2014, we entered into a long-term supply agreement whereby we are committed to purchase a significant portion of our North American display fixtures requirements from ~~Rock-Tenn~~the ~~Company~~acquirer. The supply agreement has an initial term of five years. We are committed to purchase $180 million of display fixture related products, accessories and/or services over the initial term of the agreement. As of February 2829, ~~2015~~2016, we~~’ve~~ have purchased approximately $1027 million towards this commitment.

In addition to the contracts noted in the table, we issue purchase orders for products, materials and supplies used in the ordinary course of business. These purchase orders typically do not include long-term volume commitments, are based on pricing terms ~~previously~~ previously negotiated with vendors and are generally cancelable with the appropriate notice prior to receipt of the materials or supplies. Accordingly, the foregoing table excludes open purchase orders for such products, materials and supplies as of February 2829, ~~2015~~2016. Also, we provide credit support to Schurman through a liquidity guaranty of up to $10 million in favor of the lenders under Schurman’s senior revolving credit facility as described in Note 1 to the Consolidated Financial Statements under Part II, Item 8 of this Annual Report, which are not included in the table as no amounts have been drawn and therefore we cannot determine the amount of usage in the future.

We expect to contribute $4.9 million in 2017 to the defined benefit pension plan that we assumed in connection with our acquisition of Gibson Greetings, Inc. in 2001. This represents the legally required minimum contribution level. Any discretionary additional contributions we may make are not expected to exceed the deductible limits established by Internal Revenue Service regulations. Based on historic patterns and currently scheduled benefit payments, we expect to contribute $2.6 million to the Supplemental Executive Retirement Plan in 2017, which represents the expected benefit payment for that period. Refer to Note 12 to the Consolidated Financial Statements under Part II, Item 8 of this Annual Report for further information.

We expect to contribute $5.3 million in 2016 to the defined benefit pension plan that we assumed in connection with our acquisition of Gibson Greetings, Inc. in 2001. This represents the legally required minimum contribution level. Any discretionary additional contributions we may make are not expected to exceed the deductible limits established by Internal Revenue Service regulations. Based on historic patterns and currently scheduled benefit payments, we expect to contribute $2.5 million to the Supplemental Executive Retirement Plan in 2016, which represents the expected benefit payment for that period. Refer to Note 12 to the Consolidated Financial Statements under Part II, Item 8 of this Annual Report for further information.

Critical Accounting Estimates

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. Refer to Note 1 to the Consolidated Financial Statements under Part II, Item 8 of this Annual Report. The following paragraphs include a discussion of the critical areas that required a higher degree of judgment or are considered complex in nature.

Allowance for Doubtful Accounts

We evaluate the collectibility of our accounts receivable based on a combination of factors. In circumstances where we are aware of a customer’s inability to meet its financial obligations, a specific allowance for bad debts against amounts due is recorded to reduce the receivable to the amount we reasonably expect ~~will~~to ~~be collected~~collect. In addition, we recognize allowances for bad debts based on estimates developed by using standard quantitative measures incorporating historical write-offs. The establishment of allowances requires the use of judgment and assumptions regarding the potential for losses on receivable balances. Although we consider these balances adequate and proper, changes in economic conditions in the retail markets in which we operate could have a material effect on the required allowance balances.

Sales Returns

We provide for estimated returns for products sold with the right of return, primarily seasonal cards and certain other seasonal products, in the same period as the related revenues are recorded. These estimates are based upon historical sales returns, the amount of current year sales and other known factors. Estimated return rates utilized for establishing estimated returns reserves have approximated actual returns experience. However, actual returns may differ significantly, either favorably or unfavorably, from these estimates if factors such as the historical data we used to calculate these estimates do not properly reflect future returns or as a result of changes in economic conditions of the customer and/or its market. We regularly monitor our actual performance to estimated return rates and the adjustments attributable to any changes have historically not been material.

Deferred Costs

In the normal course of our business, we enter into agreements with certain customers for the supply of greeting cards and related products. We view such agreements as advantageous in developing and maintaining business with our retail customers. The customer may receive a combination of cash payments, credits, discounts, allowances and other incentives to be earned as product is purchased from us over the stated term of the agreement or minimum purchase volume commitment. These agreements are negotiated individually to meet competitive situations and therefore, while some aspects of the agreements may be similar, important contractual terms may vary. In addition, the agreements may or may not specify us as the sole supplier of social expression products to the customer.

Although risk is inherent in the granting of advances or fixed payments on a term agreement, we subject such customers to our normal credit review. We maintain ana general allowance for deferred costs based on estimates developed by using standard quantitative measures incorporating historical write-offs. In instances where we are aware of a particular customer’s inability to meet its performance obligation, or lower-than-expected future cash flows in a fixed term agreement are insufficient to recover our deferred cost, we record a specific allowance to reduce the deferred cost asset to an estimate of its future value based upon expected recoverability. ~~Losses~~ Depending on the amount of the loss attributed to these specific events, ~~have~~such ~~historically~~losses ~~not~~could ~~been~~have a material adverse effect on our consolidated financial position and results of operations for a particular period, depending, in part, upon the operating results for such period.

Goodwill and Other Intangible Assets

~~Goodwill~~ lives and ~~Other~~are ~~Intangible~~thus ~~Assets~~not amortized, but subject to an impairment test annually or more frequently if indicators of impairment arise. We complete the annual goodwill and indefinite-lived intangible asset impairment tests during the fourth quarter. To test for goodwill impairment, we are required to estimate the fair market value of each of our reporting units. While we may use a variety of methods to estimate fair value for impairment testing, our primary methods are discounted cash flows and a market based analysis. We estimate future cash flows and allocations of certain assets using estimates for future growth rates and our judgment regarding the applicable discount rates. Changes to our judgments and estimates could result in a significantly different estimate of the fair market value, which could result in an impairment of goodwill or other indefinite-lived intangible asset.

Goodwill represents the excess of purchase price over the estimated fair value of net assets acquired in business combinations accounted for by the purchase method. In accordance with ASC Topic 350 (“ASC 350”), “Intangibles—Goodwill and Other,” goodwill and certain intangible assets are presumed to have indefinite useful lives and are thus not amortized, but subject to an impairment test annually or more frequently if indicators of impairment arise. We complete the annual goodwill and indefinite-lived intangible asset impairment tests during the fourth quarter. To test for goodwill impairment, we are required to estimate the fair market value of each of our reporting units. While we may use a variety of methods to estimate fair value for impairment testing, our primary methods are discounted cash flows and a market based analysis. We estimate future cash flows and allocations of certain assets using estimates for future growth rates and our judgment regarding the applicable discount rates. Changes to our judgments and estimates could result in a significantly different estimate of the fair market value of the reporting units, which could result in an impairment of goodwill.

Deferred Income Taxes

Deferred income taxes are recognized at currently enacted tax rates for temporary differences between the financial reporting and income tax bases of assets and liabilities and operating loss and tax credit carryforwards. In assessing the realizability of deferred tax assets, we assess whether it is more likely than not that a portion or all of the deferred tax assets will not be realized. We consider the scheduled reversal of deferred tax liabilities, tax planning strategies and projected future taxable income in making this assessment. The assumptions used in this assessment are consistent with our internal planning. A valuation allowance is recorded against those deferred tax assets determined to not be realizable based on our assessment. The amount of net deferred tax assets considered realizable could be increased or decreased in the future if our assessment of future taxable income or tax planning strategies change.

Recent Accounting Pronouncements

In ~~August 2014~~February 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. ~~2014~~2016-1502, ( “~~ASU~~Leases ~~2014-15”~~(Topic 842),.” ~~“Disclosure~~ASU of2016-02 ~~Uncertainties~~will ~~About~~require anlessees ~~Entity’s~~to ~~Ability~~recognize toa ~~Continue~~right-of-use asasset and a ~~Going~~lease ~~Concern”~~liability. ~~ASU~~The ~~2014~~right-15of-use ~~requires~~asset ~~management~~and tolease ~~perform~~liability ~~interim~~will ~~and~~be initially ~~annual~~measured ~~assessments~~at ofthe anpresent ~~entity’s~~value ~~ability~~of tothe ~~continue~~lease aspayments ~~a going~~in ~~concern~~the ~~within~~statement ~~one~~of ~~year~~financial ofposition. ~~the~~Lessor ~~date~~accounting under the ~~financial~~new ~~statements~~guidance ~~are~~is ~~issued~~largely ~~and~~unchanged. ~~provides~~For ~~guidance~~public onbusiness ~~determining~~entities, ~~when~~ASU ~~and~~2016-02 ~~how~~is toeffective ~~disclose~~for ~~going~~interim ~~concern~~and ~~uncertainties~~annual reporting inperiods ~~the~~beginning ~~financial~~after ~~statements.~~December 15, ~~Certain~~2018, ~~disclosures~~with ~~will~~early beadoption ~~required~~permitted. ifIn ~~conditions give~~transition, ~~rise~~lessees toand ~~substantial~~lessors ~~doubt~~are ~~about~~required anto ~~entity’s~~recognize ~~ability~~and tomeasure ~~continue~~leases asat athe ~~going~~beginning ~~concern.~~of ~~ASU~~the ~~2014-15~~earliest ~~applies~~period topresented ~~all~~using ~~entities~~a ~~and~~modified isretrospective approach, ~~effective~~which ~~for~~includes ~~annual~~a ~~and~~number ~~interim~~of ~~reporting~~optional ~~periods~~practical ~~ending~~expedients. ~~after~~We ~~December 15,~~are ~~2016,~~currently ~~with~~evaluating ~~early~~the ~~adoption permitted.~~new ~~The~~guidance ~~Corporation~~and ~~does~~have not ~~expect~~determined ~~that~~ the ~~adoption~~impact of this standards update ~~will~~may ~~impact~~have ~~its~~on our consolidated financial statements.

In ~~May~~January ~~2014~~2016, the FASB issued ASU ~~No. 2014~~2016-~~09 (“ASU 2014-09”)~~01, “~~Revenue~~Financial ~~from~~Instruments ~~Contracts~~Overall ~~with~~(Subtopic ~~Customers”. The objective of ASU 2014~~825-1910): isRecognition ~~to establish a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers~~ and ~~will~~Measurement ~~supersede most~~ of ~~the~~Financial ~~existing~~Assets ~~revenue~~and Financial ~~recognition guidance, including industry-specific guidance~~Liabilities.” ~~The core principle of~~ ASU ~~2014~~2016-0901 isaddresses ~~that~~certain anaspects ~~entity~~of ~~recognizes~~recognition, ~~revenue~~measurement, ~~to depict~~presentation ~~the~~and ~~transfer~~disclosure of ~~promised~~financial ~~goods~~instruments. orIn ~~services~~particular, tothis ~~customers~~ASU inrequires anequity ~~amount~~investments ~~that~~(except ~~reflects~~those ~~the~~accounted ~~consideration~~for tounder ~~which~~ the ~~entity~~equity method ~~expects~~or ~~to be entitled in exchange for~~ those ~~goods or services. The standard also introduces several new and expanded disclosures~~ that ~~will~~result ~~enable~~in ~~users~~consolidation of ~~financial~~the ~~statements~~investee) to ~~better~~be ~~understand~~measured ~~the~~at ~~nature,~~fair ~~amount,~~value ~~timing~~with ~~and~~changes ~~uncertainty~~in offair ~~revenue~~value ~~and~~recognized ~~cash~~in ~~flows~~net ~~arising from contracts with customers~~income. ~~The~~ASU ~~new~~2016-01 ~~guidance~~ is effective for ~~annual reporting periods (including~~ interim ~~periods~~and ~~within~~annual ~~those~~ periods) beginning after December 15, ~~2016 for public companies~~2017. ~~Early~~We ~~adoption is not permitted. The standard permits the use of either a retrospective or modified retrospective (cumulative effect)~~are ~~transition method. The Corporation is~~ currently evaluating the new guidance and ~~has~~have not determined the impact this ~~standard~~standards update may have on ~~its~~our consolidated financial statements ~~nor decided upon the method of adoption~~.

In November ~~April 2014~~2015, the FASB issued ASU ~~No. 2014~~2015-0817, (“~~ASU~~Balance ~~2014-08~~Sheet Classification of Deferred Taxes.”), ~~“Reporting~~ASU 2015-17 ~~Discontinued~~eliminates ~~Operations~~the ~~and~~current ~~Disclosures~~requirement offor ~~Disposals~~entities ofto separate deferred income tax assets ~~Components~~and ofliabilities aninto ~~Entity.”~~current ~~ASU~~and ~~2014-08~~noncurrent ~~changes~~amounts ~~the~~in ~~criteria~~a ~~for~~classified ~~determining~~balance ~~which~~sheet. ~~disposals~~Instead, ~~can~~entities will be ~~presented~~required asto ~~discontinued~~classify ~~operations~~all ~~and~~deferred ~~modifies~~income ~~the~~tax ~~related~~assets ~~disclosure~~and ~~requirements~~liabilities as noncurrent. ~~Under~~For ~~the~~public ~~new~~business ~~guidance~~entities, aASU ~~disposal~~2015-17 ofis aeffective for ~~component~~financial ofstatements ~~an entity~~issued orfor aannual ~~group~~periods ofbeginning ~~components~~after ofDecember 15, an2016, ~~entity~~and isinterim ~~required~~periods towithin bethose ~~reported~~annual periods, with early adoption permitted. The amendments in ~~discontinued~~ASU ~~operations~~2015-17 ifmay ~~the~~be ~~disposal~~applied ~~represents~~either aprospectively ~~strategic~~to ~~shift~~all deferred ~~that~~tax ~~has~~assets (and liabilities or ~~will~~retrospectively ~~have)~~to aall ~~major~~periods ~~effect~~presented. onDuring anthe ~~entity’s~~fourth ~~operations~~quarter ~~and~~of ~~financial~~2016, ~~results~~we ~~and~~elected ~~is disposed~~early adoption of orASU ~~classified~~2015-17 ason ~~held~~a ~~for~~prospective ~~sale~~basis. ~~The~~Accordingly, ~~standard~~deferred ~~also~~income ~~introduces~~tax ~~several~~liabilities ~~new~~and ~~disclosures.~~assets, ~~The~~as ~~guidance~~well ~~applies~~as the ~~prospectively~~related tovaluation ~~new~~allowance, ~~disposals~~are offset and ~~new~~presented ~~classifications~~as ofa ~~disposal~~single ~~groups~~noncurrent asamount ~~held~~ for ~~sale~~each ~~after~~tax ~~the~~jurisdiction ~~effective~~as ~~date~~of February 29, 2016. As ASU ~~2014~~2015-~~08 is~~17 ~~effective~~was ~~for~~not ~~annual~~retrospectively ~~and~~applied, ~~interim~~deferred ~~periods~~income ~~beginning~~tax ~~after~~liabilities ~~December 15,~~and ~~2014~~assets, ~~with~~including ~~early~~the related ~~adoption~~valuation ~~permitted.~~allowance, ~~The~~for ~~Corporation~~the ~~adopted~~year ~~ASU~~ended ~~2014-08 on August~~February 2928, ~~2014~~2015, inare ~~connection~~presented ~~with~~as current or noncurrent based on the ~~disposition~~related ofasset ~~A.G.~~or ~~Industries,~~liability ~~Inc~~for financial reporting purposes. See Note 317 to the Consolidated Financial Statements under Part II, Item 8 of this Annual Report for further information relating to the adoption of this standards update.

In July ~~2013~~2015, the FASB issued ASU ~~No. 2013~~2015-11, (“~~ASU~~Simplifying ~~2013-11”),~~the ~~“Presentation~~Measurement of ~~an Unrecognized~~Inventory.” ~~Tax~~ASU ~~Benefit~~2015-11 requires ~~When~~an aentity ~~Net~~to ~~Operating~~measure ~~Loss~~inventory ~~Carryforward,~~that ais ~~Similar~~within ~~Tax~~the ~~Loss,~~scope orof athis ~~Tax Credit Carryforward Exists.”~~ ASU ~~2013-11~~at ~~requires~~the anlower ~~unrecognized~~of ~~tax~~cost ~~benefit,~~and ornet arealizable ~~portion~~value. ofExisting animpairment ~~unrecognized~~models ~~tax~~will ~~benefit,~~continue to be ~~presented~~used infor ~~the financial~~inventories ~~statements~~that asare aaccounted ~~reduction~~for tousing athe ~~deferred~~last-in ~~tax~~first-out (“LIFO”) ~~asset~~method. ~~for~~ASU a2015-11 ~~net~~requires ~~operating~~prospective ~~loss~~adoption ~~carryforward,~~for ainventory ~~similar~~measurements ~~tax~~for ~~loss,~~fiscal oryears abeginning ~~tax~~after ~~credit carryforward~~December 15, ~~except~~2016 asand ~~follows.~~interim Toperiods ~~the~~within ~~extent~~those afiscal ~~net~~years ~~operating~~for ~~loss~~public ~~carryforward,~~business ~~a similar tax loss~~entities, orwith aearly ~~tax~~adoption ~~credit~~permitted. ~~carryforward~~At isFebruary 29, ~~not available at the reporting date~~2016, ~~the~~approximately ~~unrecognized~~40% ~~tax~~of ~~benefit~~our ~~should~~pre-LIFO beconsolidated ~~presented~~inventory inwas ~~the~~measured ~~financial~~using ~~statements as~~ a ~~liability~~method ~~and~~other ~~not~~than ~~combined with deferred tax assets~~LIFO. ~~ASU~~We ~~2013-11~~do isnot ~~effective~~expect ~~for~~the ~~annual~~adoption ~~and~~of ~~interim periods~~this ~~beginning~~standards ~~after~~update ~~December 15,~~to ~~2013~~have ~~for~~a ~~public~~material ~~companies,~~impact ~~with~~on ~~early~~our ~~adoption~~consolidated financial ~~permitted~~statements. ~~The Corporation adopted ASU 2013-11 on March 1, 2014.~~

In April 2015, the FASB issued ASU No. 2015-05, “Customers’ Accounting for Fees Paid in a Cloud Computing Arrangement.” ASU 2015-05 provides guidance on determining whether a cloud computing arrangement contains a software license that should be accounted for as internal-use software under ASC 350-40. Cloud computing arrangements not deemed to contain a software license would be accounted for as service contracts. For public business entities, ASU 2015-05 is effective for annual periods, including interim periods within those annual periods beginning after December 15, 2015. We adopted ASU 2015-05 on March 1, 2016, electing prospective application to arrangements entered into, or materially modified, after February 29, 2016. We do not expect the adoption of this standards update to have a material impact on our consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-03, “Simplifying the Presentation of Debt Issuance Costs.” ASU 2015-03 requires that all costs incurred to issue debt be presented in the balance sheet as a direct deduction from the carrying value of the debt, similar to the presentation of debt discounts. ASU 2015-03 is effective for public business entities for fiscal years beginning after December 15, 2015 and interim periods within those fiscal years, with early adoption permitted. We do not expect the adoption of this standards update to have a material impact on our consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-15, “Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern.” ASU 2014-15 requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued and provides guidance on determining when and how to disclose going concern uncertainties in the financial statements. Certain disclosures will be required if conditions give rise to substantial doubt about an entity’s ability to continue as a going concern. ASU 2014-15 applies to all entities and is effective for annual and interim reporting periods ending after December 15, 2016, with early adoption permitted. We do not expect the adoption of this standards update to have a material impact on our consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers.” Subsequent accounting standards updates were issued in August 2015 and March 2016 which amended and/or clarified the application of ASU 2014-09. The objective of ASU 2014-09, and its related amendments and clarifications, is to establish a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most of the existing revenue recognition guidance, including industry-specific guidance. The core principle of the new guidance is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. More detailed disclosures will also be required to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. For public business entities, the new revenue recognition guidance will be effective for annual and interim reporting periods beginning after December 15, 2017. Earlier adoption is permitted for annual and interim reporting periods beginning after December 15, 2016. The new guidance permits the use of either a retrospective or modified retrospective transition method. We are currently evaluating the new guidance and have not yet determined the impact it may have on our consolidated financial statements, nor the preferred method of adoption.

Factors That May Affect Future Results

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

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

•

a weak retail environment and general economic conditions;

•

the loss of one or more retail customers and/or retail consolidations, acquisitions and bankruptcies, including the possibility of resulting adverse changes to retail contract terms;

•

competitive terms of sale offered to customers, including costs and other terms associated with new and expanded customer relationships;

•

our ability to successfully complete the turnaround efforts in our retail business in the UK;

•

risks associated with leasing substantial amounts of space for our retail stores;

•

the timing and impact of expenses incurred and investments made to support new retail or product strategies, as well as new product introductions and achieving the desired benefits from those investments;

•

unanticipated expenses we may be required to incur relating to our world headquarters project;

• our ability to qualify for, and stay qualified for, state and local incentives offered to assist us in the development of a new world headquarters;

•

the timing of investments in, together with the ability to successfully implement or achieve the desired benefits and cost savings associated with, any information systems refresh we may implement;

•

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

• Schurman Fine Paper’s ability to successfully operate its retail operations and satisfy its obligations to us;

• consumer demand for social expression products generally, shifts in consumer shopping behavior, and consumer acceptance of products as priced and marketed, including the success of ~~new and expanded~~ advertising and marketing efforts~~, such as our online efforts through Cardstore.com~~;

•

the impact and availability of technology, including social media, on product sales;

•

escalation in the cost of providing employee health care;

•

the ability to comply with our debt covenants;

•

our ability to adequately maintain the security of our electronic and other confidential information;

•

fluctuations in the value of currencies in major areas where we operate, including the U.S. Dollar, Euro, UK Pound Sterling and Canadian Dollar; and

•

the outcome of any legal claims, known or unknown.

The risks and uncertainties identified above are not the only risks we face. Additional risks and uncertainties not presently known to us or that we believe to be immaterial also may adversely affect us. Should any known or unknown risks or uncertainties develop into actual events, or underlying assumptions prove inaccurate, these developments could have material adverse effects on our business, financial condition and results of operations. For further information concerning the risks we face and issues that could materially affect our financial performance related to forward-looking statements, refer to the “Risk Factors” section under Part I, Item 1A of this Annual Report.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Derivative Financial Instruments – We had no derivative financial instruments as of February 28, 2015.

Interest Rate Exposure – We manage interest rate exposure through a mix of fixed and floating rate debt. Currently, approximately 53% of our debt is carried at variable interest rates. We believe that our overall interest rate exposure risk is limited. Based on our interest rate exposure on our non-fixed rate debt as of and during the year ended February 28, 2015, a hypothetical 10% movement in interest rates would not have had a material impact on interest expense.

Foreign Currency Exposure – Our international operations expose us to translation risk when the local currency financial statements are translated into U.S. dollars. As currency exchange rates fluctuate, translation of the statements of operations of international subsidiaries to U.S. dollars could affect comparability of results between years. Approximately 36%, 36% and 35% of our 2015, 2014 and 2013 total revenue from continuing operations, respectively, were generated from operations outside the United States. Operations in Australia, New Zealand, Canada, the European Union and the UK are denominated in currencies other than U.S. dollars. No assurance can be given that future results will not be affected by significant changes in foreign currency exchange rates. However, for the year ended February 28, 2015, a hypothetical 10% weakening of the U.S. dollar would not materially affect our income before income tax expense.

Item 87A. ~~Financial~~Quantitative ~~Statements~~ and ~~Supplementary~~Qualitative ~~Data~~Disclosures About Market Risk

Index to Consolidated Financial Statements and Supplementary Financial Data	Page Number
Report of Independent Registered Public Accounting Firm		45
Consolidated Statement of Income - Years ended February 28, 2015, 2014 and 2013		46
Consolidated Statement of Comprehensive Income - Years ended February 28, 2015, 2014 and 2013		47
Consolidated Statement of Financial Position - February 28, 2015 and 2014		48
Consolidated Statement of Cash Flows - Years ended February 28, 2015, 2014 and 2013		49
Consolidated Statement of Shareholder’s Equity - Years ended February 28, 2015, 2014 and 2013		50
Notes to Consolidated Financial Statements - Years February 28, 2015, 2014 and 2013		51
Supplementary Financial Data:
Quarterly Results of Operations (Unaudited)		88

Derivative Financial Instruments – We had no derivative financial instruments as of February 29, 2016.

Interest Rate Exposure – We manage interest rate exposure through a mix of fixed and floating rate debt. Currently, approximately 46% of our debt is carried at variable interest rates. We believe that our overall interest rate exposure risk is limited. Based on our interest rate exposure on our non-fixed rate debt as of and during the year ended February 29, 2016, a hypothetical 10% movement in interest rates would not have had a material impact on interest expense.

Foreign Currency Exposure – Our international operations expose us to translation risk when the local currency financial statements are translated into U.S. dollars. As currency exchange rates fluctuate, translation of the statements of operations of international subsidiaries to U.S. dollars could affect comparability of results between years. Approximately 33%, 36% and 36% of our 2016, 2015 and 2014 total revenue from continuing operations, respectively, were generated from operations outside the United States. Operations in Australia, New Zealand, Canada, the European Union and the UK are denominated in currencies other than U.S. dollars. No assurance can be given that future results will not be affected by significant changes in foreign currency exchange rates. However, for the year ended February 29, 2016, a hypothetical 10% weakening of the U.S. dollar would not materially affect our income before income tax expense.

Item 8.

Financial Statements and Supplementary Data


Index to Consolidated Financial Statements and Supplementary Financial Data	Page Number
Report of Independent Registered Public Accounting Firm		46

Consolidated Statement of Income - Years ended February 29, 2016, February 28, 2015 and February 28, 2014		47

Consolidated Statement of Comprehensive Income - Years ended February 29, 2016, February 28, 2015 and February 28, 2014		48

Consolidated Statement of Financial Position - February 29, 2016 and February 28, 2015		49

Consolidated Statement of Cash Flows - Years ended February 29, 2016, February 28, 2015 and February 28, 2014		50

Consolidated Statement of Shareholder’s Equity - Years ended February 29, 2016, February 28, 2015 and February 28, 2014		51

Notes to Consolidated Financial Statements - Years ended February 29, 2016, February 28, 2015 and February 28, 2014		52

Supplementary Financial Data:

Quarterly Results of Operations (Unaudited)		87

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholder

American Greetings Corporation

We have audited the accompanying consolidated statement of financial position of American Greetings Corporation as of February 28 29, ~~2015 and~~2016 and February 28, ~~2014~~2015, and the related consolidated statements of income, comprehensive income, shareholder’s equity, and cash flows for each of the three years in the period ended February 28 29, ~~2015~~2016. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Corporation’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Corporation’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of American Greetings Corporation at February 28 29, ~~2015~~2016 and February 28, ~~2014~~2015, and the consolidated results of its operations and its cash flows for each of the three years in the period ended February 28 29, ~~2015~~2016, in conformity with U.S. generally accepted ~~accounting~~ accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

As discussed in Note 1 to the consolidated financial statements, the Corporation has adopted ASU 2015-17 Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. Our opinion is not modified with respect to this matter.

/s/ Ernst & Young LLP

Cleveland, Ohio

May 1526, ~~2015~~2016

4546

CONSOLIDATED STATEMENT OF INCOME

Years ended February 29, 2016, February 28, 2015, ~~2014~~ and ~~2013~~February 28, 2014

Thousands of dollars

2015

2014

2013

2016

2015

2014

Net sales

1,~~986~~889,~~352~~994

1,~~941~~986,~~809~~352

1,~~842~~941,~~544~~809

Other revenue

2410,~~617~~796

2724,~~857~~617

2627,~~195~~857

Total revenue

21,~~010~~900,~~969~~790

12,~~969~~010,~~666~~969

1,~~868~~969,~~739~~666

Material, labor and other production costs

~~882~~844,~~337~~839

~~857~~882,~~227~~337

~~817~~857,~~740~~227

Selling, distribution and marketing expenses

~~696~~656,~~543~~799

~~685~~696,~~088~~543

~~653~~685,~~935~~088

Administrative and general expenses

~~289~~252,~~433~~983

~~297~~289,~~443~~433

~~298~~297,~~569~~443

Goodwill and other intangible assets impairment

~~21,924~~—

~~733~~21,924

—733

Other operating (income) expense – net

(23,674

)

(7,718

)

4,330

Other operating income – net

(72,858

)

(23,674

)

(7,718

)

Operating income

~~144~~219,~~406~~027

~~136~~144,~~893~~406

94136,~~165~~893

Interest expense

3627,~~020~~201

2736,~~363~~020

1727,~~896~~363

Interest income

(~~2,639~~356

)

(~~400~~2,639

)

(~~471~~400

)

Other non-operating expense (income) – net

~~319~~1,193

~~(3,296~~319

)

(93,~~174~~296

)

Income before income tax expense

~~110~~190,~~706~~989

~~113~~110,~~226~~706

85113,~~914~~226

Income tax expense

4561,~~599~~147

6245,~~704~~599

3562,~~996~~704

Net income

65129,~~107~~842

5065,~~522~~107

4950,~~918~~522

See notes to consolidated financial statements.

4647

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Years ended February 29, 2016, February 28, 2015, ~~2014~~ and ~~2013~~February 28, 2014

Thousands of dollars

	2015			2014			2013
	2016			2015			2014
Net income	$	65129,~~107~~842		$	5065,~~522~~107		$	4950,~~918~~522
Other comprehensive (loss) income, net of tax:
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		(2315,~~303~~371	)		12(23,~~545~~303	)		~~(11~~12,~~015~~545	)
Pension and postretirement benefit adjustments		(~~1,852~~389	)		5(1,~~344~~852	)		5,~~712~~344
Unrealized (loss) gain on securities		—			(4	)		—
Unrealized gain (loss) on securities		20,505			—			(4	)
Other comprehensive (loss) income, net of tax		(25,155	)		17,885			(5,303	)
Other comprehensive income (loss), net of tax		4,745			(25,155	)		17,885
Comprehensive income	$	39134,~~952~~587		$	6839,~~407~~952		$	4468,~~615~~407

See notes to consolidated financial statements.

4748

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

February 2829, ~~2015~~2016 and ~~2014~~February 28, 2015

Thousands of dollars except share and per share amounts

	2015			2014
	2016			2015
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	43100,~~327~~893		$	6343,~~963~~327
Trade accounts receivable, net		~~102~~94,~~339~~392			97102,~~925~~339
Inventories		~~248~~227,~~577~~456			~~254~~248,~~761~~577
Deferred and refundable income taxes		458,~~976~~056			4645,~~996~~976
Assets held for sale		~~35,529~~—			—35,529
Prepaid expenses and other		~~157~~129,~~669~~071			~~146~~157,~~164~~669
Total current assets		~~633~~559,~~417~~868			~~609~~633,~~809~~417
OTHER ASSETS		~~431~~476,~~838~~359			~~542~~431,~~766~~838
DEFERRED AND REFUNDABLE INCOME TAXES		9099,~~143~~512			7490,~~103~~143
PROPERTY, PLANT AND EQUIPMENT – NET		~~380~~467,~~297~~710			~~375~~380,~~765~~297
	$	1,~~535~~603,~~695~~449		$	1,~~602~~535,~~443~~695
LIABILITIES AND SHAREHOLDER’S EQUITY
CURRENT LIABILITIES
Debt due within one year	$	—		$	20,000
Accounts payable	$	109,014		$	133,135
Accounts payable		133,135			120,568
Accrued liabilities		79,873			75,992
Accrued liabilities		75,992			68,838
Accrued compensation and benefits		101,014			95,193
Accrued compensation and benefits		95,193			74,017
Income taxes payable		11,151			22,512
Income taxes payable		22,512			14,866
Liabilities held for sale		—			1,712
Liabilities held for sale		1,712			—
Deferred revenue		26,271			27,200
Deferred revenue		27,200			31,288
Other current liabilities		50,617			63,199
Other current liabilities		63,199			85,785
Total current liabilities		377,940			418,943
Total current liabilities		418,943			415,362
LONG-TERM DEBT		406,318			472,729
LONG-TERM DEBT		472,729			539,114
OTHER LIABILITIES		379,768			303,231
OTHER LIABILITIES		303,231			301,815
DEFERRED INCOME TAXES AND NONCURRENT INCOME TAXES PAYABLE		10,129			11,466
DEFERRED INCOME TAXES AND NONCURRENT INCOME TAXES PAYABLE		11,466			18,705
SHAREHOLDER’S EQUITY
Common shares – par value $.01 per share: 100 shares issued and outstanding		—			—
Capital in excess of par value		240,000			240,000
Accumulated other comprehensive (loss) income		(24,403	)		752
Accumulated other comprehensive loss		(19,658	)		(24,403	)
Retained earnings		~~113~~208,~~729~~952			86113,~~695~~729
Total shareholder’s equity		~~329~~429,~~326~~294			~~327~~329,~~447~~326
	$	1,~~535~~603,~~695~~449		$	1,~~602~~535,~~443~~695

See notes to consolidated financial statements.

4849

CONSOLIDATED STATEMENT OF CASH FLOWS

Years ended February 29, 2016, February 28, 2015, ~~2014~~ and ~~2013~~February 28, 2014

Thousands of dollars

	2015			2014			2013
	2016			2015			2014
OPERATING ACTIVITIES:
Net income	$	65129,~~107~~842		$	5065,~~522~~107		$	4950,~~918~~522
Adjustments to reconcile net income to cash flows from operating activities:
Goodwill and other intangible assets impairment		21,924			733			—
Gain on sale of Strawberry Shortcake		(61,234	)		—			—
Fixed asset impairment		3,660			258			—
Adjustment to gain (gain) on sale of AGI In-Store		1,073			(35,004	)		—
Contract asset impairment		4,422			—			—
Goodwill and other intangible assets impairment		—			21,924			733
Stock-based compensation		—			8,091			10,743
Fixed asset impairment		4,083			3,660			258
Gain on sale of AGI In-Store		(35,004	)		—			—
Contract asset impairment, net of recovery		7,657			4,422			—
Net loss on disposal of fixed assets		15,983			560			631
Stock-based compensation		—			—			8,091
Depreciation and intangible assets amortization		59,853			55,025			49,405
Net loss on disposal of fixed assets		179			15,983			560
Provision for doubtful accounts		1,214			368			16,064
Depreciation and intangible assets amortization		55,734			59,853			55,025
Clinton Cards secured debt (recovery) impairment		(3,390	)		(4,910	)		8,106
Provision for doubtful accounts		577			1,214			368
Interest on Clinton Cards secured debt		(2,507	)		—			—
Clinton Cards secured debt recovery		—			(3,390	)		(4,910	)
Deferred income taxes		(21,357	)		22,615			27,530
Interest on Clinton Cards secured debt		—			(2,507	)		—
Gain related to investment in third party		—			(3,262	)		(4,293	)
Deferred income taxes		16,937			(21,357	)		22,615
Other non-cash charges		6,938			6,783			1,198
Gain related to investment in third party		—			—			(3,262	)
Other non-cash charges		5,353			6,938			6,783
Changes in operating assets and liabilities, net of acquisitions and dispositions:
Trade accounts receivable		~~(13~~3,~~241~~962	)		8(13,~~359~~241	)		(98,~~820~~359	)
Inventories		~~(20~~12,~~325~~365	)		(620,~~761~~325	)		(316,~~558~~761	)
Other current assets		(~~652~~1,377	)		~~16,086~~(652	)		~~(23~~16,~~404~~086	)
Net payable/receivable with related parties		1(2,~~945~~081	)		~~(395~~1,945	)		—(395	)
Income taxes		(9,~~752~~763	)		219,~~151~~752			~~(18~~21,~~607~~151	)
Deferred costs – net		~~(10~~12,~~133~~879	)		(2210,~~209~~133	)		27(22,~~069~~209	)
Accounts payable and other liabilities		45(41,~~446~~276	)		245,~~046~~446			582,~~586~~046
Other – net		3(7,~~084~~541	)		~~5,014~~715			15,~~196~~014
Total Cash Flows From Operating Activities		~~132~~127,~~719~~369			~~160~~130,~~074~~350			~~162~~160,~~764~~074
INVESTING ACTIVITIES:
Property, plant and equipment additions		(9186,~~166~~018	)		(5491,~~097~~166	)		(~~114~~54,~~149~~097	)
Cash received in Clinton Cards acquisition		—			—			621
Proceeds from sale of fixed assets		1,126			24,198			1,652
Proceeds from sale of fixed assets		24,198			1,652			853
Proceeds from sale of Strawberry Shortcake		105,000			—			—
Proceeds from sale of AGI In-Store		73,659			—			—
(Adjustment to proceeds) proceeds from sale of AGI In-Store		(3,200	)		73,659			—
Proceeds from Clinton Cards administration		11,926			7,644			—
Proceeds from surrender of corporate-owned life insurance policies		24,068			2,369			—
Proceeds related to investment in third party		—			12,105			6,061
Proceeds from Clinton Cards administration		—			11,926			7,644
Cash paid for acquired character property rights		(37,700	)		—			—
Proceeds related to investment in third party		—			—			12,105
Purchase of Clinton Cards debt		—			—			(56,560	)
Cash paid for acquired character property rights		(2,800	)		(37,700	)		—
Total Cash Flows From Investing Activities		~~(19~~38,~~083~~176	)		(3216,~~696~~714	)		(~~163~~32,~~174~~696	)
FINANCING ACTIVITIES:
Proceeds from revolving lines of credit		~~416~~474,~~700~~070			~~385~~416,~~736~~700			~~543~~385,~~150~~736
Repayments on revolving lines of credit		(~~416~~478,~~900~~370	)		(~~442~~416,~~436~~900	)		(~~481~~442,~~950~~436	)
Proceeds from term loan		—			~~339,250~~—			—339,250
Repayments on term loan		(9065,000	)		(1090,000	)		—(10,000	)
Issuance, exercise or settlement of share-based payment awards		—			~~(4,487~~—	)		(24,~~648~~487	)
Tax benefit from share-based payment awards		—			~~279~~—			~~364~~279
Contribution from parent		—			~~240,000~~—			—240,000
Payments to shareholders to effect merger		—			~~(568,303~~—	)		—(568,303	)
Dividends to shareholders		(3834,~~073~~619	)		(8538,~~034~~073	)		(1985,~~927~~034	)
Purchase of treasury shares		—			—			(80,991	)
Financing fees		—			(1,065	)		(8,045	)
Financing fees		(1,065	)		(8,045	)		—
Total Cash Flows From Financing Activities		(103,919	)		(129,338	)		(153,040	)
Total Cash Flows From Financing Activities		(129,338	)		(153,040	)		(42,002	)
EFFECT OF EXCHANGE RATE CHANGES ON CASH		(4,060	)		(4,934	)		3,566
EFFECT OF EXCHANGE RATE CHANGES ON CASH		(4,934	)		3,566			(3,967	)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		57,566			(20,636	)		(22,096	)
DECREASE IN CASH AND CASH EQUIVALENTS		(20,636	)		(22,096	)		(46,379	)
Cash and Cash Equivalents at Beginning of Year		43,327			63,963			86,059
Cash and Cash Equivalents at Beginning of Year		63,963			86,059			132,438
Cash and Cash Equivalents at End of Year	$	100,893		$	43,327		$	63,963
Cash and Cash Equivalents at End of Year	$	43,327		$	63,963		$	86,059

See notes to consolidated financial statements.

4950

CONSOLIDATED STATEMENT OF SHAREHOLDER’S EQUITY

Years ended February 29, 2016, February 28, 2015, ~~2014~~ and ~~2013~~February 28, 2014

Thousands of dollars except per share amounts

															Accumulated
									Capital in						Other
	Common Shares								Excess of			Treasury			Comprehensive			Retained
	Common		Class A			Class B			Par Value			Stock			Income (Loss) ~~Income~~			Earnings			Total
BALANCE FEBRUARY 29, 2012	$	—	$	34,011		$	2,842		$	513,163		$	(1,020,838	)	$	(11,830	)	$	1,210,110		$	727,458
BALANCE FEBRUARY 28, 2013	$	—	$	29,088		$	2,883		$	522,425		$	(1,093,782	)	$	(17,133	)	$	1,238,396		$	681,877
Net income		—		—			—			—			—			—			49,918			49,918
Other comprehensive loss		—		—			—			—			—			(5,303	)		—			(5,303	)
Cash dividends - $0.60 per share		—		—			—			—			—			—			(19,929	)		(19,929	)
Sale of shares under benefit plans, including tax benefits		—		401			40			(1,491	)		411			—			(1,699	)		(2,338	)
Purchase of treasury shares		—		(5,325	)		(2	)		—			(73,415	)		—			—			(78,742	)
Stock compensation expense		—		—			—			10,743			—			—			—			10,743
Stock grants and other		—		1			3			10			60			—			(4	)		70
BALANCE FEBRUARY 28, 2013		—		29,088			2,883			522,425			(1,093,782	)		(17,133	)		1,238,396			681,877
Net income		—		—			—			—			—			—			50,522			50,522
Other comprehensive income		—		—			—			—			—			17,885			—			17,885
Cash dividends to common shareholders - $.30 per share (pre-merger)		—		—			—			—			—			—			(9,614	)		(9,614	)
Cash dividends to parent		—		—			—			—			—			—			(75,420	)		(75,420	)
Sales of shares under benefit plans, including tax benefits		—		223			28			560			342			—			(1,080	)		73
Contribution from parent		—		—			—			240,000			—			—			—			240,000
Payments to shareholders to effect merger		—		(29,305	)		(606	)		—			(538,392	)		—			—			(568,303	)
Cancellation of Family Shareholders’ shares		—		(5	)		(2,307	)		—			—			—			2,312			—
Stock compensation expense		—		—			—			4,125			—			—			—			4,125
Stock grants and other		—		(1	)		2			2			25			—			(5	)		23
Settlement, modification or cancellation of share-based payment awards pursuant to merger (see Note 15)		—		—			—			(13,721	)		—			—			—			(13,721	)
Adjustments related to share-based payment awards pursuant to Merger:
Settlement of stock options		—		—			—			(3,933	)		—			—			—			(3,933	)
Conversion of performance share and restricted stock awards to cash-based liability awards		—		—			—			(6,498	)		—			—			—			(6,498	)
Cancellation of Family Shareholders’ performance share and restricted stock awards		—		—			—			3,966			—			—			—			3,966
Modification and settlement of non-executive directors’ awards		—		—			—			(371	)		—			—			—			(371	)
Net tax deficiency from settlement and cancellation of stock-based awards		—		—			—			(6,885	)		—			—			—			(6,885	)
Cancellation of treasury shares		—		—			—			(513,391	)		1,631,807			—			(1,118,416	)		—
BALANCE FEBRUARY 28, 2014		—		—			—			240,000			—			752			86,695			327,447
Net income		—		—			—			—			—			—			65,107			65,107
Other comprehensive loss		—		—			—			—			—			(25,155	)		—			(25,155	)
Cash dividends to parent		—		—			—			—			—			—			(38,073	)		(38,073	)
BALANCE FEBRUARY 28, 2015	$	—	$	—		$	—		$	240,000		$	—		$	(24,403	)	$	113,729		$	329,326
Net income		—		—			—			—			—			—			129,842			129,842
Other comprehensive income		—		—			—			—			—			4,745			—			4,745
Cash dividends to parent		—		—			—			—			—			—			(34,619	)		(34,619	)
BALANCE FEBRUARY 29, 2016	$	—	$	—		$	—		$	240,000		$	—		$	(19,658	)	$	208,952		$	429,294

See notes to consolidated financial statements.

5051

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended February 29, 2016, February 28, 2015, ~~2014~~ and ~~2013~~February 28, 2014

Thousands of dollars

NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES

Consolidation: The consolidated financial statements include the accounts of American Greetings Corporation and its subsidiaries (“American Greetings” or the “Corporation”). All significant intercompany accounts and transactions are eliminated. The Corporation’s fiscal year ends on February 28 or 29. References to a particular year refer to the fiscal year ending in February of that year. For example, ~~2015~~2016 refers to the year ended February 2829, ~~2015~~2016. The Corporation’s subsidiary, AG Retail Cards Limited, ~~acquired in 2013,~~ operates retail stores in the United Kingdom (also referred to herein as “UK”), and is consolidated on a one-month lag corresponding with its fiscal year-end of January 3130 for ~~2015~~2016.

The Corporation’s investments in less than majority-owned companies in which it has the ability to exercise significant influence over operating and financial policies are accounted for using the equity method except when they qualify as variable interest entities (“VIE”) and the Corporation is the primary beneficiary, in which case the investments are consolidated in accordance with Accounting Standards Codification (“ASC”) Topic 810 (“ASC 810”), “Consolidation.” ~~Investments that do not meet the above criteria are accounted for under the cost method.~~

Investments in equity securities, other than investments accounted for under the equity method, are classified as available-for-sale. Investments in available-for-sale equity securities that have a readily determinable fair value, and for which the Corporation does not have the ability to exercise significant influence over the investee’s operating and financial policies are measured at fair value. The cost method is used for all other investments in available-for-sale equity securities.

Prior to the fourth quarter of 2014, the Corporation held an approximate 15% equity interest in Schurman Fine Papers (“Schurman”) which is a VIE as defined in ASC 810. Schurman owns and operates specialty card and gift retail stores in the United States and Canada. The stores are primarily located in malls and strip shopping centers. During the third quarter of 2014, the Corporation determined that, due to continued operating losses, shareholders’ deficit and lack of return on the Corporation’s investment, the cost method investment was permanently impaired. As a result, the Corporation recorded an impairment charge in the amount of $1,935 which reduced the carrying amount of the investment to zero. In addition, in order to mitigate ongoing risks to the Corporation that may arise from retaining an equity interest in Schurman, during the fourth quarter of 2014, the Corporation transferred to Schurman its 15% equity interest and, as a result, no longer has an equity interest in Schurman.

The Corporation provides Schurman limited credit support through the provision of a liquidity guaranty (“Liquidity Guaranty”) in favor of the lenders under Schurman’s senior revolving credit facility (the “Senior Credit Facility”). Pursuant to the terms of the Liquidity Guaranty, the Corporation has guaranteed the repayment of up to $10,000 of Schurman’s borrowings under the Senior Credit Facility to help ensure that Schurman has sufficient borrowing availability under this facility. The Liquidity Guaranty is required to be backed by a letter of credit for the term of the Liquidity Guaranty, which expires in January 2019. The Corporation’s obligations under the Liquidity Guaranty generally may not be triggered unless Schurman’s lenders under its Senior Credit Facility have substantially completed the liquidation of the collateral under Schurman’s Senior Credit Facility, or 91 days after the liquidation is started, whichever is earlier, and will be limited to the deficiency, if any, between the amount owed and the amount collected in connection with the liquidation. There was no triggering event or liquidation of collateral as of February 2829, ~~2015~~2016 requiring the use of the Liquidity Guaranty.

During the current ~~period~~year, the Corporation assessed the variable interests in Schurman and determined that a third party holder of variable interests has the controlling financial interest in the VIE and thus, the third party, not the Corporation, is the primary beneficiary. In completing this assessment, the Corporation identified the activities that it considers most significant to the future economic success of the VIE and determined that it does not have the power to direct those activities. As such, Schurman is not consolidated in the Corporation’s results. ~~The Corporation’s maximum exposure to loss as it relates to Schurman as of February 28, 2015 includes:~~

•52 ~~Liquidity Guaranty of Schurman’s indebtedness of $10,000;~~

• normal course of business trade and other receivables due from Schurman of $22,948, the balance of which fluctuates throughout the year due to the seasonal nature of the business; and

• the operating leases currently subleased to Schurman, the aggregate lease payments for the remaining life of which was $4,238 as of February 28, 2015.

InThe ~~addition, the~~ Corporation’s ~~held~~maximum aexposure ~~minority~~to ~~investment~~loss inas ~~the~~it ~~common~~relates stock of a privately held company that effected a recapitalization transaction in July 2012. As a result of this recapitalization, the Corporation retained a portion of its investment in the company and sold its remaining common stock in the company, realizing a gain of $4,293. Additionally, on August 1, 2013, the Corporation received a cash distribution from this recapitalized company totaling $12,105, which was in part a return of capital of $8,843 that reduced the carrying amount of the investment to ~~zero,~~Schurman ~~and the remaining $3,262 realized~~ as ~~an investment gain. The total proceeds from the distributions received in 2014 and from the sale~~ of ~~common stock in 2013 associated with this investment amounted to $12~~February 29,~~105~~ ~~and~~2016 ~~$6,061, respectively, and are reflected in~~includes: “Investing Activities” on the Consolidated Statement of Cash Flows. The gains related to the Corporation’s investment in this company are included in “Other non-operating (income) expense – net” on the Consolidated Statement of Income.

~~Reclassifications:~~• ~~Certain~~Liquidity ~~amounts~~Guaranty inof ~~the~~Schurman’s ~~prior~~indebtedness ~~year~~of ~~financial statements have been reclassified to conform to the 2015 presentation.~~ $10,000;

•

normal course of business trade and other receivables due from Schurman of $25,246, the balance of which fluctuates throughout the year due to the seasonal nature of the business; and

•

the operating leases currently subleased to Schurman, the aggregate lease payments for the remaining life of which was $2,297 as of February 29, 2016.

In addition, the Corporation held a minority investment in the common stock of a privately held company that effected a recapitalization transaction in July 2012. As a result of this recapitalization, the Corporation retained a portion of its investment in the company which was classified as available-for-sale and accounted for under the cost method. During 2014, the Corporation received a cash distribution from this recapitalized company totaling $12,105, which was in part a return of capital of $8,843 that reduced the carrying amount of the investment to zero, and the remaining $3,262 was realized as an investment gain. In April 2015, the recapitalized company in which the Corporation holds its investment successfully completed an initial public offering of its common stock and thereby established a readily determinable fair value for the Corporation’s previously nonmarketable investment. In accordance with ASC Topic 320, “Investments – Debt and Equity Securities,” the investment is reported at fair value at February 29, 2016 and is included in “Other assets” on the Consolidated Statement of Financial Position. Based on the fair value measurement of this investment at February 29, 2016, an unrealized gain, net of tax, of $20,505 has been recognized in other comprehensive income in 2016. The total proceeds from the distribution received in 2014 is classified within “Investing Activities” on the Consolidated Statement of Cash Flows. The investment gain realized in 2014 is included in “Other non-operating expense (income) – net” on the Consolidated Statement of Income.

Reclassifications: Certain amounts in the prior year financial statements have been reclassified to conform to the 2016 presentation.

Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. On an ongoing basis, management reviews its estimates, including those related to sales returns, allowance for doubtful accounts, recoverability of intangibles and other long-lived assets, deferred tax asset valuation allowances, deferred costs and various other allowances and accruals, based on currently available information. Changes in facts and circumstances may alter such estimates and affect the results of operations and the financial position in future periods.

Earnings per Share: As a result of the Merger (as defined in Note 2), the Corporation’s equity is no longer publicly traded. As such, earnings per share information is not required.

Cash Equivalents: The Corporation considers all highly liquid instruments purchased with an original maturity of less than three months to be cash equivalents.

Allowance for Doubtful Accounts: The Corporation evaluates the collectibility of its accounts receivable based on a combination of factors. In circumstances where the Corporation is aware of a customer’s inability to meet its financial obligations, a specific allowance for bad debts against amounts due is recorded to reduce the receivable to the amount the Corporation reasonably expects ~~will~~to ~~be collected~~collect. In addition, the Corporation recognizes allowances for bad debts based on estimates developed by using standard quantitative measures incorporating historical write-offs. ~~See~~ See Note 6 for further information.

Concentration of Credit Risks: The Corporation sells primarily to customers in the retail trade, primarily ~~those~~ those in mass merchandising, which is comprised of three distinct channels: mass merchandisers (including discount retailers), chain drug stores and supermarkets. In addition, the Corporation sells its products through a variety of other ~~distribution~~ distribution channels, including card and gift shops, department stores, military post exchanges, variety stores and combo stores (stores combining food, general merchandise and drug items) as well as through its retail operations in the UK. The Corporation also sells paper greeting cards through its Cardstore.com Web site, and, from time to time, the Corporation sells its products to independent, third-party distributors. These customers are located throughout the United States, Canada, the United Kingdom, Australia and New Zealand. Net sales to the Corporation’s five largest customers accounted for approximately 4042%, 3940% and 39% of total revenue in ~~2015~~2016, 2014 and 2013, respectively. Net sales to Wal-Mart Stores, Inc. and its subsidiaries accounted for approximately 14% of total revenue in 2015, 2014 and 2013. Net sales to Target Corporation accounted for approximately 13% of total revenue in 2015, 2014 and 2013.

The Corporation conducts business based on periodic evaluations of its customers’ financial condition and generally does not require collateral to secure their obligation to the Corporation. While the competitiveness of the retail industry presents an inherent uncertainty, the Corporation does not believe a significant risk of loss exists from a concentration of credit.

Inventories: Finished products, work in process and raw materials inventories are carried at the lower of cost or market. The last-in, first-out (“LIFO”) cost method is used for certain domestic inventories, which approximate 55% of the total pre-LIFO consolidated inventories at February 28, 2015 and 2014. The remaining domestic and international non-retail store inventories principally use the first-in, first-out (“FIFO”) method except for display

material and factory supplies which are carried at average cost. Retail store inventories are carried at average cost. The Corporation allocates fixed production overhead to inventory based on the normal capacity of the production facilities. Abnormal amounts of idle facility expense, freight, handling costs and wasted material are treated as a current period expense. See Note 7 for further information.

Deferred Costs: In the normal course of its business, the Corporation enters into agreements with certain customers for the supply of greeting cards and related products. The Corporation classifies the total contractual amount of the incentive consideration committed to the customer but not yet earned as a deferred cost asset at the inception of an agreement, or any future amendments. Deferred costs estimated to be earned by the customer and charged to operations during the next twelve months are classified as “Prepaid expenses and other” on the Consolidated Statement of Financial Position and the remaining amounts to be charged beyond the next twelve months are classified as “Other assets.” Such costs are capitalized as assets reflecting the probable future economic benefits obtained as a result of the transactions. Future economic benefit is further defined as cash inflow to the Corporation. The Corporation, by incurring these costs, is ensuring the probability of future cash flows through sales to customers. The amortization of such deferred costs over the stated term of the agreement or the minimum purchase volume commitment properly matches the cost of obtaining business over the periods to be benefited. The Corporation maintains an allowance for deferred costs based on estimates developed using standard quantitative measures incorporating historical write-offs. In instances where the Corporation is aware of a particular customer’s inability to meet its performance obligation, a specific allowance is recorded to reduce the deferred cost asset to an estimate of its future value based upon expected recoverability. See Note 10 for further discussion.

Deferred Film Production Costs: The Corporation is engaged in the production of film-based entertainment, which is generally exploited in the DVD, theatrical release or broadcast format. This entertainment is related to Strawberry Shortcake, Care Bears and other properties developed by the Corporation and is used to support the Corporation’s merchandise licensing strategy.

Film production costs are accounted for pursuant to ASC Topic 926 (“ASC 926”), “Entertainment – Films,” and are stated at the lower of cost or net realizable value based on anticipated total revenue (“ultimate revenue”). Film production costs are generally capitalized. These costs are then recognized ratably based on the ratio of the current period’s revenue to estimated remaining ultimate revenues. Ultimate revenues are calculated in accordance with ASC 926 and require estimates and the exercise of judgment. Accordingly, these estimates are periodically updated to include the actual results achieved or new information as to anticipated revenue performance of each title.

Production expense totaled $2,031, $3,514 and $3,360 in 2015, 2014 and 2013, respectively, with no significant amounts related to changes in ultimate revenue estimates during these periods. These production costs are included in “Material, labor and other production costs” on the Consolidated Statement of Income. Amortization of production costs totaling $1,377, $2,776 and $2,089 in 2015, 2014 and 2013, respectively, are included in “Other - net” within “Operating Activities” on the Consolidated Statement of Cash Flows. As of February 28, 2015, a portion of deferred film production costs was classified as held for sale related to the expected sale of the Strawberry Shortcake property. See Note 3 for further information. The balance of deferred film production costs was $2,173 and $7,031 at February 28, 2015 and 2014, respectively, and is included in “Other assets” on the Consolidated Statement of Financial Position. The Corporation expects to amortize approximately $400 of production costs during the next twelve months.

Investment in Life Insurance: The Corporation’s investment in corporate-owned life insurance policies is recorded in “Prepaid and other expenses” and “Other assets” net of policy loans and related interest payable on the Consolidated Statement of Financial Position. The net balance was $28,772 and $28,886 as of February 28, 2015 and 2014, respectively. The net life insurance expense, including interest expense, is included in “Administrative and general expenses” on the Consolidated Statement of Income. The related interest expense, which approximates amounts paid, was $11,671, $11,591 and $11,427 in 2015, 2014 and 2013, respectively. In the fourth quarter of 2015, in order to mitigate the ongoing risks to the Corporation that may arise from retaining certain policies, the Corporation surrendered those policies. This action had a significant impact on the Corporation’s tax rate in the current year. See Note 17 for further information.

Goodwill and Other Intangible Assets: Goodwill represents the excess of purchase price over the estimated fair value of net assets acquired in business combinations and is not amortized in accordance with ASC Topic 350, “Intangibles – Goodwill and Other.” This topic addresses the amortization of intangible assets with finite lives and the impairment testing and recognition for goodwill and indefinite-lived intangible assets. The Corporation is

~~required~~2015 toand ~~evaluate~~2014, ~~the~~respectively. ~~carrying~~Net ~~value~~sales ofto ~~its~~Wal-Mart ~~goodwill~~Stores, Inc. and ~~indefinite-lived~~its ~~intangible~~subsidiaries ~~assets~~accounted for ~~potential~~approximately ~~impairment~~15% onof antotal ~~annual~~revenue ~~basis~~in or2016 ~~more~~and ~~frequently~~14% ifof ~~indicators~~total ~~arise.~~revenue ~~While~~in ~~the Corporation~~2015 ~~may~~and ~~use~~2014. aNet ~~variety of methods~~ sales to ~~estimate~~Target ~~fair~~Corporation ~~value~~accounted for ~~impairment~~approximately ~~testing,~~14% ~~its~~of ~~primary~~total ~~methods~~revenue ~~are~~in ~~discounted~~2016 ~~cash flows~~ and a13% ~~market~~of ~~based~~total ~~analysis.~~revenue ~~The~~in ~~required~~2015 ~~annual~~and ~~impairment tests are completed during the fourth quarter~~2014. ~~Intangible~~ ~~assets with finite lives are amortized over their estimated lives. See Note 9 for further discussion.~~

Inventories: Finished products, work in process and raw materials inventories are carried at the lower of cost or market. The last-in, first-out (“LIFO”) cost method is used for certain domestic inventories, which approximate 58% and 55% of the total pre-LIFO consolidated inventories at February 29, 2016 and February 28, 2015, respectively. The remaining domestic and international non-retail store inventories principally use the first-in, first-out (“FIFO”) method except for display material and factory supplies which are carried at average cost. Retail store inventories are carried at average cost. The Corporation allocates fixed production overhead to inventory based on the normal capacity of the production facilities. Abnormal amounts of idle facility expense, freight, handling costs and wasted material are treated as a current period expense. See Note 7 for further information.

Deferred Costs: In the normal course of its business, the Corporation enters into agreements with certain customers for the supply of greeting cards and related products. These agreements may contain incentive payment arrangements to the customers. The Corporation classifies the total contractual amount of the incentive consideration committed to the customer but not yet earned as a deferred cost asset at the inception of an agreement, or any future amendments. Deferred costs estimated to be earned by the customer and charged to operations during the next twelve months are classified as “Prepaid expenses and other” on the Consolidated Statement of Financial Position and the remaining amounts to be charged beyond the next twelve months are classified as “Other assets.” Such costs are capitalized as assets reflecting the probable future economic benefits obtained as a result of the transactions. Future economic benefit is further defined as cash inflow to the Corporation. The Corporation, by incurring these costs, is ensuring the probability of future cash flows through sales to customers. The amortization of such deferred costs over the stated term of the agreement or the minimum purchase volume commitment properly matches the cost of obtaining business over the periods to be benefited. The Corporation maintains a general allowance for deferred costs based on estimates developed using standard quantitative measures incorporating historical write-offs. In instances where the Corporation is aware of a particular customer’s inability to meet its performance obligation, or lower-than-expected future cash flows in a fixed term agreement are insufficient to recover the deferred cost, a specific allowance is recorded to reduce the deferred cost asset to an estimate of its future value based upon expected recoverability. See Note 10 for further discussion.

Deferred Film Production Costs: The Corporation is engaged in the production of film-based entertainment, which is generally exploited in the DVD, theatrical release or broadcast format. This entertainment is related to certain character properties, such as Strawberry Shortcake (prior to its sale in March 2015), Care Bears and other properties developed by the Corporation and is used to support the Corporation’s merchandise licensing strategy.

Film production costs are accounted for pursuant to ASC Topic 926 (“ASC 926”), “Entertainment – Films,” and are stated at the lower of cost or net realizable value based on anticipated total revenue (“ultimate revenue”). Film production costs are generally capitalized. These costs are then recognized ratably based on the ratio of the current period’s revenue to estimated remaining ultimate revenues. Ultimate revenues are calculated in accordance with ASC 926 and require estimates and the exercise of judgment. Accordingly, these estimates are periodically updated to include the actual results achieved or for new information as to anticipated revenue performance of each title.

Production expense totaled $2,291, $2,031 and $3,514 in 2016, 2015 and 2014, respectively, with no significant amounts related to changes in ultimate revenue estimates during these periods. These production costs are included in “Material, labor and other production costs” on the Consolidated Statement of Income. Amortization of production costs totaling $880, $1,377 and $2,776 in 2016, 2015 and 2014, respectively, are included in “Other - net” within “Operating Activities” on the Consolidated Statement of Cash Flows. As of February 28, 2015, a portion of deferred film production costs was classified as held for sale related to the then expected sale of the Strawberry Shortcake property. See Note 3 for further information. The balance of deferred film production costs was $3,441 and $2,173 at February 29, 2016 and February 28, 2015, respectively, and is included in “Other assets” on the Consolidated Statement of Financial Position. The Corporation expects to amortize approximately $1,500 of production costs during the next twelve months.

Investment in Life Insurance: The Corporation’s investment in corporate-owned life insurance policies is recorded in “Prepaid expenses and other” and “Other assets” net of policy loans and related interest payable on the Consolidated Statement of Financial Position. The net balance was $4,946 and $28,772 as of February 29, 2016 and February 28, 2015, respectively. The net life insurance expense, including interest expense, is included in “Administrative and general expenses” on the Consolidated Statement of Income. The related interest expense, which approximates amounts paid, was $8,496, $11,671 and $11,591 in 2016, 2015 and 2014, respectively. In the second and fourth quarters of 2015, in order to mitigate the ongoing risks to the Corporation that may arise from retaining certain policies, the Corporation surrendered those policies. Cash proceeds received in 2016 and 2015 from the surrendered policies totaled $24,068 and $2,369, respectively, and are classified within “Investing Activities” on the Consolidated Statement of Cash Flows. This action had a significant impact on the Corporation’s tax rate in 2015. See Note 17 for further information.

Goodwill and Other Intangible Assets: Goodwill represents the excess of purchase price over the estimated fair value of net assets acquired in business combinations and is not amortized in accordance with ASC Topic 350, “Intangibles – Goodwill and Other.” This topic addresses the amortization of intangible assets with finite lives and the impairment testing and recognition for goodwill and indefinite-lived intangible assets. The Corporation is required to evaluate the carrying value of its goodwill and indefinite-lived intangible assets for potential impairment on an annual basis or more frequently if indicators arise. While the Corporation may use a variety of methods to estimate fair value for impairment testing, its primary methods are discounted cash flows and a market based analysis. The required annual impairment tests are completed during the fourth quarter. Intangible assets with finite lives are amortized over their estimated lives. See Note 9 for further discussion.

Property and Depreciation: Property, plant and equipment are carried at cost. Depreciation and amortization of buildings, software, equipment and fixtures are computed principally by the straight-line method over the useful lives of the various assets. The cost of buildings is depreciated over 40 years; computer hardware and software over 3 to 10 years; machinery and equipment over 3 to 15 years; and furniture and fixtures over 8 to 20 years. Leasehold improvements are amortized over the lesser of the lease term or the estimated life of the leasehold improvement. Property, plant and equipment are reviewed for impairment in accordance with ASC Topic 360 (“ASC 360”), “Property, Plant and Equipment.” ASC 360 also provides a single accounting model for the disposal of long-lived assets. See Note 8 for further information.

Disposal Group Held for Sale: In accordance with ASC Topic 205, “Presentation of Financial Statements,” assets and liabilities of a disposal group classified as held for sale are presented separately in the asset and liability sections of the Consolidated Statement of Financial Position. In addition, in accordance with ASC 360, assets of a disposal group held for sale are stated at the lower of their fair values less cost to sell or carrying amounts and depreciation and amortization is no longer recognized.

Operating Leases: Rent expense for operating leases, which may have escalating rentals over the term of the lease, is recorded on a straight-line basis over the initial lease term. The initial lease term includes the “build-out” period of leases, where no rent payments are typically due under the terms of the lease. The difference between rent expense and rent paid is recorded as deferred rent. Construction allowances received from landlords are recorded as a deferred rent credit and amortized to rent expense over the initial term of the lease. The Corporation records lease rent expense net of any related sublease income. See Note 13 for further information.

Pension and Other Postretirement Benefits: The Corporation has several defined benefit pension plans and a defined benefit health care plan that provides postretirement medical benefits to full-time United States employees who meet certain requirements. In accordance with ASC Topic 715, “Compensation-Retirement Benefits,” the Corporation recognizes the plans’ funded status in its statement of financial position, measures the plans’ assets and obligations as of the end of its fiscal year and recognizes the changes in a defined benefit postretirement plan’s funded status in comprehensive income in the year in which the changes occur. See Note 12 for further information.

Revenue Recognition: Sales are recognized when title and the risk of loss have been transferred to the customer, which generally occurs upon delivery.

Seasonal cards and certain other seasonal products are generally sold with the right of return on unsold merchandise. The Corporation provides for estimated returns of these products when those sales are recognized. These estimates are based on historical sales returns, the amount of current year sales and other known factors. Accrual rates utilized for establishing estimated returns reserves have approximated actual returns experience.

~~Products~~55 sold without a right of return may be subject to sales credit issued at the Corporation’s discretion for damaged, obsolete and outdated products. The Corporation maintains an estimated reserve for these sales credits based on historical information.

For retailers with a scan-based trading (“SBT”) arrangement, the Corporation owns the product delivered to its retail customers until the product is sold by the retailer to the ultimate consumer, at which time the Corporation recognizes revenue for both everyday and seasonal products. When a SBT arrangement with a retailer is finalized, the Corporation reverses previous sales transactions based on retailer inventory turn rates and the estimated timing of the store conversions. Legal ownership of the inventory at the retailer’s stores reverts back to the Corporation at the time of the conversion and the amount of sales reversal is finalized based on the actual inventory at the time of conversion.

Sales at the Corporation’s retail operations in the UK are recognized upon the sale of product to the consumer.

Products sold without a right of return may be subject to sales credit issued at the Corporation’s discretion for damaged, obsolete and outdated products. The Corporation maintains an estimated reserve for these sales credits based on historical experience.

For retailers with a scan-based trading (“SBT”) arrangement, the Corporation owns the product delivered to its retail customers until the product is sold by the retailer to the ultimate consumer, at which time the Corporation recognizes revenue for both everyday and seasonal products. When a SBT arrangement with a retailer is finalized with an existing customer, the Corporation reverses previous sales transactions based on retailer inventory turn rates and the estimated timing of the store conversions. Legal ownership of the inventory at the retailer’s stores reverts back to the Corporation at the time of the conversion and the amount of sales reversal is finalized based on the actual inventory at the time of conversion.

Sales at the Corporation’s Retail Operations segment, which operates in the UK, are recognized upon the sale of product to the consumer.

Subscription revenue, primarily for the AG Interactive segment, represents fees paid by customers for access to particular services for the term of the subscription. Subscription revenue is generally billed in advance and is recognized ratably over the subscription periods.

The Corporation has agreements for licensing certain characters and other intellectual property. These license agreements provide for royalty revenue to the Corporation based on a percentage of net sales and are subject to certain guaranteed minimum royalties. These license agreements may include the receipt of upfront advances, which are recorded as deferred revenue and earned during the period of the agreement. Certain of these agreements are managed by outside agents. All payments flow through the agents prior to being remitted to the Corporation. Typically, the Corporation receives monthly payments from the agents. Royalty revenue is generally recognized upon cash receipt and is recorded in “Other revenue.” on the Consolidated Statement of Income. Revenues and expenses associated with the servicing of these agreements are summarized as follows:

	2015		2014		2013
	2016		2015		2014
Royalty revenue	$	228,~~660~~791	$	2622,~~170~~660	$	2426,~~740~~170
Royalty expenses:
Material, labor and other production costs	$	24,~~602~~325	$	82,~~583~~602	$	98,~~929~~583
Selling, distribution and marketing expenses		62,~~297~~993		6,~~339~~297		76,~~336~~339
Administrative and general expenses		21,~~003~~488		12,~~945~~003		1,~~848~~945
	$	108,~~902~~806	$	1610,~~867~~902	$	1916,~~113~~867

Due to the sale of Strawberry Shortcake in March 2015, royalty revenue and expenses for 2015 and 2014 do not have comparative amounts in the current year. See Note 3 for further discussion.

Sales Taxes: Sales taxes are not included in net sales as the Corporation is a conduit for collecting and remitting taxes to the appropriate taxing authorities.

Translation of Foreign Currencies: Asset and liability accounts are translated into United States dollars using exchange rates in effect at the date of the Consolidated Statement of Financial Position; revenue and expense accounts are translated at average exchange rates during the related period. Translation adjustments are reflected as a component of shareholder’s equity within accumulated other comprehensive income (loss). Upon sale, or upon complete or substantially complete liquidation of an investment in a foreign entity, that component of shareholder’s equity is reclassified as part of the gain or loss on sale or liquidation of the investment. Gains and losses resulting from foreign currency transactions, including intercompany transactions that are not considered permanent investments, are included in “Other non-operating expense (income) ~~expense~~ - net” as incurred.

Shipping and Handling ~~Fees~~Costs: ~~The~~Shipping ~~Corporation classifies shipping~~ and ~~handling~~ ~~fees~~handling ascosts ~~part~~ of ~~“Selling~~$126,359, ~~distribution and marketing expenses.” Shipping and handling fees were~~ $128,928, and $127,400 in 2016, 2015 and ~~$132~~2014,~~508~~ respectively, are included in ~~2015~~“Selling, ~~2014~~distribution and ~~2013,~~marketing ~~respectively~~expenses.”

~~Advertising~~56 ~~Expenses: Advertising costs are expensed as incurred. Advertising expenses were $17,470, $22,724 and $32,120 in 2015, 2014 and 2013, respectively.~~

Income Taxes: Income tax expense includes both current and deferred taxes. Current tax expense represents the amount of income taxes paid or payable (or refundable) for the year, including interest and penalties. Deferred income taxes, net of appropriate valuation allowances, are recognized for the estimated future tax effects attributable to tax carryforwards and the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts realized for income tax purposes. The effect of a change to the deferred tax assets or liabilities as a result of new tax law, including tax rate changes, is recognized in the period that the tax law is enacted. Valuation allowances are recorded against deferred tax assets when it is more likely than not that such assets will not be realized. When an uncertain tax position meets the more likely than not recognition threshold, the position is measured to determine the amount of benefit to recognize in the financial statements. See Note 17 for further discussion.

Advertising Expenses: Advertising costs are expensed as incurred. Advertising expenses were $18,131, $17,470 and $22,724 in 2016, 2015 and 2014, respectively.

Income Taxes: The Corporation is included in the consolidated tax return of a parent company, Century Intermediate Holding Company 3 (“CIHC3”), pursuant to a tax sharing arrangement. The provision for income taxes recognized in the Corporation’s consolidated financial statements is calculated using the separate return method. Under this method, the Corporation is assumed to be a separate taxpayer rather than a member of CIHC3’s consolidated income tax return group.

Income tax expense includes both current and deferred taxes. Current tax expense represents the amount of income taxes paid or payable (or refundable) for the year, including interest and penalties. Deferred income taxes, net of appropriate valuation allowances, are recognized for the estimated future tax effects attributable to tax carryforwards and the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts realized for income tax purposes. The effect of a change to the deferred tax assets or liabilities as a result of new tax law, including tax rate changes, is recognized in the period that the tax law is enacted. Valuation allowances are recorded against deferred tax assets when it is more likely than not that such assets will not be realized. When an uncertain tax position meets the more-likely-than-not recognition threshold, the position is measured to determine the amount of benefit to recognize in the financial statements. See Note 17 for further discussion.

Recent Accounting Pronouncements

In ~~August~~February ~~2014~~2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. ~~2014~~2016-1502, ( “~~ASU~~Leases ~~2014-15”~~(Topic 842),.” ~~“Disclosure~~ASU of2016-02 ~~Uncertainties~~will ~~About~~require anlessees ~~Entity’s~~to ~~Ability~~recognize toa ~~Continue~~right-of-use asasset and a ~~Going~~lease ~~Concern”~~liability. ~~ASU~~The ~~2014~~right-15of-use ~~requires~~asset ~~management to perform interim~~ and ~~annual~~lease ~~assessments~~liability ofwill anbe ~~entity’s~~initially ~~ability~~measured toat ~~continue~~the ~~as a~~present ~~going~~value ~~concern~~of ~~within~~the ~~one~~lease ~~year~~payments ofin the ~~date~~statement ~~the~~of financial ~~statements~~position. ~~are~~Lessor ~~issued~~accounting ~~and~~under ~~provides~~the new guidance onis ~~determining~~largely ~~when~~unchanged. ~~and~~For ~~how~~public tobusiness ~~disclose~~entities, ~~going~~ASU ~~concern~~2016-02 ~~uncertainties~~is ineffective ~~the~~for ~~financial~~interim ~~statements.~~and ~~Certain~~annual ~~disclosures~~reporting ~~will~~periods bebeginning ~~required if conditions~~after ~~give~~December 15, ~~rise~~2018, towith ~~substantial~~early ~~doubt~~adoption ~~about~~permitted. anIn ~~entity’s~~transition, ~~ability~~lessees toand ~~continue~~lessors asare arequired ~~going~~to ~~concern.~~recognize ~~ASU~~and ~~2014-15~~measure ~~applies~~leases toat ~~all~~the ~~entities~~beginning ~~and~~of isthe ~~effective~~earliest ~~for~~period ~~annual~~presented ~~and~~using ~~interim~~a ~~reporting~~modified ~~periods~~retrospective ~~ending after December 15~~approach, ~~2016,~~which ~~with~~includes ~~early~~a ~~adoption~~number ~~permitted~~of optional practical expedients. The Corporation ~~does~~is ~~not~~currently ~~expect~~evaluating ~~that~~ the ~~adoption~~new ofguidance and has not determined the impact this standards update ~~will~~may ~~impact~~have on its consolidated financial statements.

In ~~May~~January ~~2014~~2016, the FASB issued ASU ~~No. 2014~~2016-~~09 (“ASU 2014-09”)~~01, “~~Revenue~~Financial ~~from~~Instruments ~~Contracts~~Overall ~~with~~(Subtopic ~~Customers”. The objective of ASU 2014~~825-1910): isRecognition ~~to establish a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers~~ and ~~will~~Measurement ~~supersede most~~ of ~~the~~Financial ~~existing~~Assets ~~revenue~~and Financial ~~recognition guidance, including industry-specific guidance~~Liabilities.” ~~The core principle of~~ ASU ~~2014~~2016-0901 isaddresses ~~that~~certain anaspects ~~entity~~of ~~recognizes~~recognition, ~~revenue~~measurement, ~~to depict~~presentation ~~the~~and ~~transfer~~disclosure of ~~promised~~financial ~~goods~~instruments. orIn ~~services~~particular, tothis ~~customers~~ASU inrequires anequity ~~amount~~investments ~~that~~(except ~~reflects~~those ~~the~~accounted ~~consideration~~for tounder ~~which~~ the ~~entity~~equity method ~~expects~~or ~~to be entitled in exchange for~~ those ~~goods or services. The standard also introduces several new and expanded disclosures~~ that ~~will~~result ~~enable~~in ~~users~~consolidation of ~~financial~~the ~~statements~~investee) to ~~better~~be ~~understand~~measured ~~the~~at ~~nature,~~fair ~~amount,~~value ~~timing~~with ~~and~~changes ~~uncertainty~~in offair ~~revenue~~value ~~and~~recognized ~~cash~~in ~~flows~~net ~~arising from contracts with customers~~income. ~~The~~ASU ~~new~~2016-01 ~~guidance~~ is effective for ~~annual reporting periods (including~~ interim ~~periods~~and ~~within~~annual ~~those~~ periods) beginning after December 15, ~~2016 for public companies~~2017. ~~Early adoption is not permitted.~~ The ~~standard permits the use of either a retrospective or modified retrospective (cumulative effect)~~ ~~transition method. The~~ Corporation is currently evaluating the new guidance and has not determined the impact this ~~standard~~standards update may have on its consolidated financial statements ~~nor decided upon the method of adoption~~.

In ~~April~~November ~~2014~~2015, the FASB issued ASU ~~No. 2014~~2015-0817, (“~~ASU~~Balance ~~2014-08~~Sheet Classification of Deferred Taxes.”), ASU 2015-17 ~~“Reporting~~eliminates ~~Discontinued~~the ~~Operations~~current ~~and~~requirement ~~Disclosures~~for ofentities ~~Disposals~~to ~~of Components~~separate ofdeferred anincome ~~Entity.”~~tax ~~ASU~~assets ~~2014-08~~and ~~changes~~liabilities ~~the~~into ~~criteria~~current ~~for~~and ~~determining~~noncurrent ~~which~~amounts ~~disposals~~in ~~can~~a classified balance sheet. Instead, entities will be ~~presented~~required asto ~~discontinued~~classify ~~operations~~all ~~and~~deferred ~~modifies~~income ~~the~~tax ~~related~~assets ~~disclosure~~and ~~requirements~~liabilities as noncurrent. ~~Under~~For ~~the~~public ~~new~~business ~~guidance~~entities, aASU ~~disposal~~2015-17 ofis aeffective ~~component~~for offinancial ~~an entity~~statements orissued afor ~~group~~annual ofperiods ~~components~~beginning ofafter anDecember 15, ~~entity~~2016, isand ~~required~~interim periods towithin bethose ~~reported~~annual periods, with early adoption permitted. The amendments in ~~discontinued~~ASU ~~operations~~2015-17 ifmay ~~the~~be ~~disposal~~applied ~~represents~~either aprospectively ~~strategic~~to ~~shift~~all ~~that~~deferred ~~has~~tax (assets and liabilities or ~~will~~retrospectively ~~have)~~to aall ~~major~~periods ~~effect~~presented. onDuring anthe ~~entity’s~~fourth ~~operations~~quarter of ~~and~~2016, ~~financial~~the ~~results~~Corporation ~~and~~elected ~~is disposed~~early adoption of orASU ~~classified~~2015-17 ason ~~held~~a ~~for~~prospective ~~sale~~basis. ~~The~~Accordingly, ~~standard~~deferred ~~also~~income ~~introduces~~tax ~~several~~liabilities ~~new~~and ~~disclosures.~~assets, ~~The~~as ~~guidance~~well ~~applies~~as ~~prospectively~~the torelated ~~new~~valuation ~~disposals~~allowance, ~~and~~are ~~new~~offset ~~classifications~~and ofpresented ~~disposal~~as ~~groups~~a assingle ~~held~~noncurrent amount for each ~~sale~~tax ~~after~~jurisdiction ~~the~~as ~~effective~~of ~~date~~February 29, 2016. As ASU ~~2014~~2015-~~08 is~~17 ~~effective~~was ~~for~~not ~~annual~~retrospectively ~~and~~applied, ~~interim~~deferred ~~periods~~income ~~beginning~~tax ~~after~~liabilities ~~December 15,~~and ~~2014~~assets, ~~with~~including ~~early~~the ~~adoption~~related ~~permitted.~~valuation ~~The~~allowance, ~~Corporation~~for ~~adopted~~the ~~ASU~~year ~~2014-08~~ended ~~on August~~February 2928, ~~2014~~2015, inare ~~connection~~presented ~~with~~as current ~~the~~or ~~disposition~~noncurrent ofbased ~~its~~on ~~subsidiary~~the ~~A.G.~~related ~~Industries,~~asset ~~Inc. (dba~~or ~~AGI~~liability ~~In-Store~~for ~~“AGI~~financial ~~In-Store”)~~reporting purposes. See Note 317 for further information relating to the adoption of this standards update.

In July ~~2013~~2015, the FASB issued ASU ~~No. 2013~~2015-11 ~~(“ASU 2013-11”)~~, “~~Presentation~~Simplifying ofthe anMeasurement ~~Unrecognized~~of ~~Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists~~Inventory.” ASU ~~2013~~2015-11 requires an ~~unrecognized~~entity ~~tax~~to ~~benefit,~~measure orinventory athat ~~portion of an~~is ~~unrecognized~~within ~~tax benefit, to be presented in~~ the ~~financial~~scope ~~statements~~of asthis aASU reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the ~~reporting~~lower ~~date,~~of ~~the~~cost ~~unrecognized tax benefit should be presented in the financial statements as a liability~~ and ~~not~~net ~~combined~~realizable ~~with deferred tax assets~~value. ~~ASU 2013-11 is effective for annual and interim periods beginning after December 15, 2013 for public companies, with early adoption permitted. The Corporation adopted ASU 2013-11 on March 1, 2014.~~

5657

Existing impairment models will continue to be used for inventories that are accounted for using the last-in first-out (“LIFO”) method. ASU 2015-11 requires prospective adoption for inventory measurements for fiscal years beginning after December 15, 2016 and interim periods within those fiscal years for public business entities, with early adoption permitted. At February 29, 2016, approximately 40% of the Corporation’s pre-LIFO consolidated inventory is measured using a method other than LIFO. The Corporation does not expect that the adoption of this standards update will have a material impact on its consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-05, “Customers’ Accounting for Fees Paid in a Cloud Computing Arrangement.” ASU 2015-05 provides guidance on determining whether a cloud computing arrangement contains a software license that should be accounted for as internal-use software under ASC 350-40. Cloud computing arrangements not deemed to contain a software license would be accounted for as service contracts. For public business entities, ASU 2015-05 is effective for annual periods, including interim periods within those annual periods beginning after December 15, 2015. The Corporation adopted ASU 2015-05 on March 1, 2016, electing prospective application to arrangements entered into, or materially modified, after February 29, 2016. The Corporation does not expect that the adoption of this standards update will have a material impact on its consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-03, “Simplifying the Presentation of Debt Issuance Costs.” ASU 2015-03 requires that all costs incurred to issue debt be presented in the balance sheet as a direct deduction from the carrying value of the debt, similar to the presentation of debt discounts. ASU 2015-03 is effective for public business entities for fiscal years beginning after December 15, 2015 and interim periods within those fiscal years, with early adoption permitted. The Corporation does not expect that the adoption of this standards update will have a material impact on its consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-15, “Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern.” ASU 2014-15 requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued and provides guidance on determining when and how to disclose going concern uncertainties in the financial statements. Certain disclosures will be required if conditions give rise to substantial doubt about an entity’s ability to continue as a going concern. ASU 2014-15 applies to all entities and is effective for annual and interim reporting periods ending after December 15, 2016, with early adoption permitted. The Corporation does not expect that the adoption of this standards update will impact its consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers.” Subsequent accounting standards updates have been issued which amend and/or clarify the application of ASU 2014-09. The objective of ASU 2014-09, and its related amendments and clarifications, is to establish a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most of the existing revenue recognition guidance, including industry-specific guidance. The core principle of the new guidance is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. More detailed disclosures will also be required to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. For public business entities, the new revenue recognition guidance will be effective for annual and interim reporting periods beginning after December 15, 2017. Earlier adoption is permitted for annual and interim reporting periods beginning after December 15, 2016. The new guidance permits the use of either a retrospective or modified retrospective transition method. The Corporation is currently evaluating the new guidance and has not determined the impact it may have on its consolidated financial statements, nor the preferred method of adoption.

NOTE 2 – MERGER

At a special meeting of the Corporation’s shareholders held on August 7, 2013, the shareholders voted to adopt an Agreement and Plan of Merger, as amended (the “Merger Agreement”) among the Corporation, Century Intermediate Holding Company, a Delaware corporation (“Parent”), and Century Merger Company, an Ohio corporation and a wholly-owned subsidiary of Parent (“Merger Sub”), and the merger contemplated thereby (the “Merger”). On August 9, 2013 (“Merger Date”), the Corporation completed the Merger. As a result of the Merger, the Corporation is now ~~wholly~~ wholly-owned by Parent, which is indirectly owned by Morry Weiss, the Chairman of the Board of the Corporation, Zev Weiss, a co-Chief Executive Officer and a director of the Corporation, ~~Jeff~~Jeffrey Weiss, a co-Chief Executive Officer and a director of ~~the~~ the Corporation, Elie Weiss, the President of Real Estate and a director of the Corporation, Gary Weiss, a Vice President and a director of the Corporation, and certain other members of the Weiss family and related entities (“Family Shareholders”).

In58 connection with the Merger, common shares held by the shareholders of the Corporation, other than the Family Shareholders, were converted into the right to receive $19.00 per share in cash. Common shares held by the Family Shareholders were contributed to Parent as equity and thereafter cancelled for no consideration. As a result of the Merger, all formerly outstanding and treasury Class A and Class B common shares have been cancelled. As described in the Agreement and Plan of Merger, all stock based compensation plans of the Corporation were modified, settled or cancelled as a result of the Merger. All outstanding stock based awards related to the Family Shareholders were cancelled without consideration. See Note 15 for further information.

In connection with the Merger, common shares held by the shareholders of the Corporation, other than the Family Shareholders, were converted into the right to receive $19.00 per share in cash. Common shares held by the Family Shareholders were contributed to Parent as equity and thereafter cancelled for no consideration. As a result of the Merger, all formerly outstanding and treasury Class A and Class B common shares have been cancelled. As described in the Agreement and Plan of Merger, all stock-based compensation plans of the Corporation were modified, settled or cancelled as a result of the Merger. All outstanding stock-based awards related to the Family Shareholders were cancelled without consideration. See Note 15 for further information.

The Corporation incurred costs associated with the Merger which included transaction costs and incremental compensation expense related to the settlement of stock options and modification and cancellation of outstanding restricted stock units and performance shares. The charges incurred in 2014 associated with the Merger are reflected on the Consolidated Statement of Income as follows:

		Incrementalcompensationexpense				Transaction-related ~~costs~~expense				Total
Administrative and general expenses		$	10,601			$	17,524			$	28,125

These charges are included in the Corporation’s Unallocated segment.

The Corporation will continue to apply its historical basis of accounting in its stand-alone financial statements after the Merger. This is based on the determination under ~~Accounting~~ASC ~~Standards Codification~~ Topic 805, “Business Combinations,” that Parent is the acquiring entity and the determination under the Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin No. 54, codified as Topic 5J, “Push Down Basis of Accounting Required In Certain Limited Circumstances,” that while the push down of Parent’s basis in the Corporation is permissible, it is not required due to the existence of significant outstanding public debt securities of the Corporation before and after the Merger. In concluding that the outstanding public debt is significant, the Corporation considered both quantitative and qualitative factors, including both the book value and fair value of the outstanding public debt securities, as well as a number of provisions contained within the securities which impacted Parent’s ability to control their form of ownership of the Corporation.

NOTE 3 – ACQUISITIONS AND DISPOSITIONS

Sale of Strawberry Shortcake

OnIn February 2, 2015, the Corporation entered into an agreement to sell its Strawberry Shortcake character property and related intangible assets and ~~license~~licensing agreements ~~for~~(collectively, “Strawberry Shortcake”). Cash proceeds of $105,000, ~~cash~~which the ~~with~~Corporation ~~the~~received ~~expectation~~upon ~~that~~completion of the sale ~~would~~in ~~close~~March by2015, noare ~~later~~classified ~~than March 31,~~within ~~2015.~~“Investing AsActivities” ~~such,~~on atthe ~~February 28,~~Consolidated ~~2015,~~Statement ~~the~~of ~~assets~~Cash Flows, and ~~liabilities~~a ~~related~~gain toof ~~Strawberry Shortcake~~$61,234 ~~which~~is ~~are~~reflected ~~included~~ in ~~the~~“Other ~~Corporation’s~~operating ~~non-reportable~~income ~~operating~~– net” ~~segment,~~on ~~were~~the ~~classified~~Consolidated asStatement ~~held~~of Income for ~~sale.~~the ~~See~~year ~~Note~~ended 20February 29, ~~for further information~~2016.

As the agreement was entered into prior to the end of 2015, the assets and liabilities related to Strawberry Shortcake, and previously included in the Corporation’s non-reportable segment, were classified as held for sale at February 28, 2015. The major classes of assets and liabilities held for sale included in the ~~Corporation’s~~ Consolidated Statement of Financial Position as of February 28, 2015 were as follows:

	Assets
Prepaid expenses and other	$	229
Other assets		35,300
	$	35,529
	Liabilities
Accrued liabilities	$	500
Deferred revenue		1,212
	$	1,712


	Liabilities
Accrued liabilities	$	500
Deferred revenue		1,212

	$	1,712

Character Property Rights Acquisition

On December 18, 2014, the Corporation, in order to secure complete control and ownership over the rights in certain character properties, including the Strawberry Shortcake property, that the Corporation previously granted to a third party (the “Character Property Rights”), paid $37,700 to purchase these rights, and recorded the rights as indefinite-lived intangible assets. As of February 28, 2015, due to the pending sale of Strawberry Shortcake, the majority of these assets were classified as “Assets held for sale” on the Consolidated Statement of Financial Position. In addition to the ~~$37,700~~initial ~~paid~~purchase ~~for these rights~~price paid, in the ~~event~~purchase ofagreement aprovided ~~future~~for ~~sale~~an ofadditional ~~these Character~~payment ~~Property~~of ~~Rights~~up ~~and~~to ~~the~~$4,000, ~~associated~~which ~~character~~was ~~properties,~~contingent upon the ~~Corporation~~level ~~would~~of beproceeds ~~required,~~received ~~depending~~by on the ~~proceeds~~Corporation offrom ~~such~~any subsequent sale, toof ~~pay~~the upacquired toproperties. Consequently, an additional payment of $42,~~000~~800 ofwas paid to the ~~proceeds~~seller ~~that~~in it2016 ~~receives~~as ~~from~~a ~~any~~result ~~such~~of the sale of Strawberry Shortcake. ~~Subsequent~~The ~~to year-end,~~cash payments in ~~March~~2016 and 2015, to acquire the ~~Corporation~~Character ~~made~~Property anRights ~~additional~~are ~~payment~~reflected inwithin “Investing Activities” on the ~~amount~~Consolidated Statement of Cash ~~$2,800~~Flows.

Sale of AGI In-Store

On August 29, 2014, the Corporation completed the sale of its wholly-owned display fixtures business, AGI In-Store, ~~to Rock-Tenn Company~~ for $73,659 in cash, subject to closing date working capital ~~adjustments. Subsequent to the end of the fiscal year, in March 2015, the working capital adjustments were finalized~~ and acertain ~~payment~~agreed-upon ofinventory ~~$3,200 was made to the buyer~~adjustments. A gain of $35,004, which ~~includes~~included the final working capital adjustments, ~~has~~of ~~been~~$3,200, was recognized from the sale ~~and is included~~ in ~~“Other operating income – net” on the Consolidated Statement of Income~~2015. ~~AGI~~During ~~In-Store~~2016, ~~which is included in~~ the ~~non-reportable~~Corporation ~~segment,~~recorded ~~had operating~~an ~~income~~adjustment of $531,073 infor ~~2015 through~~ the ~~date~~repayment of ~~sale~~proceeds ~~and~~related ~~$18,707~~to ofcertain ~~operating~~non-saleable ~~income~~closing-date ininventory that ~~2014.~~the Inbuyer ~~connection~~had ~~with~~ the ~~sale~~right ofto ~~AGI~~return ~~In-Store,~~to the Corporation ~~entered~~after ~~into~~twelve amonths ~~long-term~~from ~~supply agreement whereby~~ the ~~Corporation~~date isof ~~committed~~sale. toThe ~~purchase a~~gain ~~significant~~recognized ~~portion~~in of2015 ~~its~~and ~~North~~the ~~American~~adjustment ~~display~~recorded ~~fixtures~~in ~~requirements~~2016 ~~from~~is ~~Rock-Tenn~~included ~~Company.~~in ~~The~~“Other ~~supply~~operating ~~agreement~~income ~~has~~– annet” ~~initial~~on ~~term~~the Consolidated Statement of ~~five years~~Income. ~~The~~Cash ~~Corporation~~proceeds isand ~~committed~~repayments toin ~~purchase~~2015 ~~$180~~and 2016,~~000~~ ofrespectively, ~~display~~resulting ~~fixture~~from ~~related~~the ~~products, accessories~~sale ~~and/or~~are ~~services~~classified ~~over~~within “Investing Activities” on the ~~initial~~Consolidated ~~term~~Statement of ~~the~~Cash ~~agreement~~Flows.

Sale of World Headquarters

On July 1, 2014, the Corporation sold its current world headquarters location and entered into an operating lease arrangement with the new owner of the building. The Corporation expects to remain in ~~this~~its current location until the ~~completion~~construction of the new world headquarters is complete, which ~~the~~is ~~Corporation~~anticipated ~~anticipates~~to ~~will~~ occur in calendar year 2016. Net of transaction costs, the Corporation received cash proceeds of $13,535 in ~~cash~~ from the sale, and recorded a non-cash loss on disposal of $15,544 induring the ~~Corporation’s~~prior year second ~~fiscal~~ quarter, which ~~loss~~ is ~~included~~reflected in “Other operating income – net” on the Consolidated Statement of Income. The cash proceeds are included in “Proceeds from sale of fixed assets” on the Consolidated Statement of Cash Flows.

Clinton Cards Acquisition

During the first quarter of 2013, the Corporation acquired all of the outstanding senior secured debt of Clinton Cards for $56,560 (£35,000) through Lakeshore Lending Limited (“Lakeshore”), a wholly-owned subsidiary of the Corporation organized under the laws of the UK. Subsequently, on May 9, 2012, Clinton Cards was placed into administration, a procedure similar to Chapter 11 bankruptcy in the United States. Prior to entering into administration, Clinton Cards had approximately 750 stores and annual revenues of approximately $600,000 across its two primary retail brands, Clinton Cards and Birthdays. The legacy Clinton Cards business had been an important customer to the Corporation’s international business for approximately forty years and was one of the Corporation’s largest customers.

As part of the administration process, the administrators (“Administrators”) of Clinton Cards and certain of its subsidiaries (the “Sellers”) conducted an auction of certain assets of the business of the Sellers that they believed constituted a viable ongoing business. Lakeshore bid $37,168 (£23,000) for certain of these remaining assets. The bid took the form of a “credit bid,” where the Corporation used a portion of the outstanding senior secured debt owed to Lakeshore by Clinton Cards to pay the purchase price for the assets. The bid was accepted by the Administrators and on June 6, 2012 the Corporation entered into an agreement with the Sellers and the Administrators for the purchase of certain assets and the related business of the Sellers.

Under the terms of the agreement, the Corporation acquired 388 stores from the Sellers, including lease assignments with the landlords, the associated inventory and overhead, as well as the Clinton Cards and related brands. See Note 13 for further information regarding long-term lease obligations.

The stores and assets not acquired by the Corporation were liquidated through the administration process and the proceeds were used to repay the creditors of the Sellers. Through this process, which was completed in 2015, the Corporation fully recovered the non-credit bid portion of its investment in the senior secured debt. Net of other administration expenses, cash distributions received from the Administrators in 2015 and 2014 totaled $11,926 and $7,644, respectively. The cash distributions received in 2015 include $2,507 of accumulated interest that was previously not expected to be received. This interest is included in “Interest income” in 2015 on the Consolidated Statement of Income. See Note 4 for further information.

In 2013, charges associated with the aforementioned acquisition totaled $35,730 and are reflected on the Consolidated Statement of Income as follows:

	Contractassetimpairment		Bad debtexpense		Legal andadvisoryfees		Impairmentof debtpurchased		Total
Net sales	$	3,981	$	—	$	—	$	—	$	3,981
Administrative and general expenses		—		16,514		7,129		—		23,643
Other operating (income) expense – net		—		—		—		8,106		8,106
	$	3,981	$	16,514	$	7,129	$	8,106	$	35,730

These charges are reflected in the Corporation’s reportable segments as follows:

	Contractassetimpairment		Bad debtexpense		Legal andadvisoryfees		Impairmentof debtpurchased		Total
International Social Expression Products	$	3,981	$	16,514	$	—	$	—	$	20,495
Unallocated		—		—		7,129		8,106		15,235
	$	3,981	$	16,514	$	7,129	$	8,106	$	35,730

The fair value of the consideration given has been allocated to the assets acquired and the liabilities assumed based upon their fair values at the date of acquisition. The following represents the final purchase price allocation:

Purchase price (in millions):
Credit bid	$	37.2
Effective settlement of pre-existing relationships with the legacy Clinton Cards business		6.4
Cash acquired		(0.6	)
	$	43.0
Allocation (in millions):
Inventory	$	5.5
Property, plant and equipment		18.4
Indefinite-lived intangible assets		22.5
Current liabilities assumed		(3.4	)
	$	43.0

The financial results of this acquisition are included in the Corporation’s consolidated results from the date of acquisition. Pro forma results of operations have not been presented because the effect of this acquisition was not deemed material at the date of acquisition. The acquired business is included in the Corporation’s Retail Operations segment.

NOTE 4 – OTHER INCOME AND EXPENSE

Other Operating (Income) ~~Expense~~ - Net

	2015			2014			2013
	2016			2015			2014
Gain on sale of AGI In-Store	$	(35,004	)	$	—		$	—
Gain on sale of Strawberry Shortcake	$	(61,234	)	$	—		$	—
Clinton Cards secured debt (recovery) impairment		(3,390	)		(4,910	)		8,106
Adjustment to gain (gain) on sale of AGI In-Store		1,073			(35,004	)		—
Net loss on disposal of fixed assets		15,983			560			631
Clinton Cards secured debt recovery		—			(3,390	)		(4,910	)
Termination of certain agency agreements		—			—			2,125
State tax credits		(9,141	)		—			—
Miscellaneous		(1,263	)		(3,368	)		(6,532	)
Net loss on disposal of fixed assets		179			15,983			560
Other operating (income) expense – net	$	(23,674	)	$	(7,718	)	$	4,330
Miscellaneous		(3,735	)		(1,263	)		(3,368	)
Other operating income – net	$	(72,858	)	$	(23,674	)	$	(7,718	)

During ~~2015~~2016, the Corporation recognized a gain of $3561,~~004~~234 from the sale of ~~AGI~~Strawberry ~~In-Store~~Shortcake. ~~The cash proceeds of $73,659 from the sale are included in “Proceeds from sale of AGI In-Store” on the Consolidated Statement of Cash Flows.~~ See Note 3 for further information.

During 2013, based on the initial recovery estimates provided by the Administrators, the Corporation recorded an impairment loss of $8,106 related to the senior secured debt of Clinton Cards. In 2014, the Corporation recorded an impairment recovery of $4,910 based on updated information provided by the Administrators. During the first quarter of 2015, the Administrators further revised their recovery estimates to indicate that the outstanding senior secured debt would be fully recovered. Accordingly, a reversal of the remaining impairment loss of $3,390 was recognized. See Note 3 for further information.

In July 2014, the Corporation sold its current world headquarters location. Net of transaction costs, the Corporation received $13,535 cash from the sale, and recorded a non-cash loss on disposal of $15,544, which loss is included in “Net loss on disposal of fixed assets” in the table above. See Note 3 for further information.

In 2013, the Corporation recorded expenses totaling $2,125 related to the termination of certain agency agreements associated with its licensing business.

“Miscellaneous” in 2013 included, among other things, a gain recognized on the sale of an insignificant non-card product line within the International Social Expression Products segment of $1,432 and a gain recognized on the disposition of assets within the AG Interactive segment of $1,134.

The Corporation recognized income of $9,141 during 2016 related to non-income based tax credits received from the State of Ohio for certain incentive programs made available to the Corporation in connection with the relocation of its world headquarters within Ohio.

During 2015, the Corporation recognized a gain of $35,004 from the sale of AGI In-Store. In 2016, the Corporation recorded an adjustment to reduce the gain by $1,073 in accordance with the contractual terms of the sale. See Note 3 for further information.

During 2013, the Corporation acquired all of the outstanding senior secured debt of Clinton Cards (“Clintons”), a UK-based retailer and important customer to the Corporation’s international business for $56,560 (£35,000). Clintons was subsequently placed into administration, a process similar to Chapter 11 bankruptcy in the United States. As part of the administration process, the Corporation acquired certain assets of Clintons that were deemed to constitute a viable ongoing business in exchange for $37,168 (£23,000) of Clinton’s then outstanding senior secured debt owed to the Corporation. Recovery of the remaining investment in the senior secured debt was subject to the proceeds received by the administrators (“Administrators”) from the liquidation of the Clintons’ stores and assets that were not acquired by the Corporation. Based on the initial recovery estimates provided by the Administrators, the Corporation impaired its remaining investment in the senior secured debt and recognized a valuation loss of $8,106 in 2013. Over the course of the administration process, which was completed in 2015, updated recovery estimates provided by the Administrators combined with liquidation proceeds periodically received from the Administrators resulted in impairment loss reversals of $3,390 and $4,910 during 2015 and 2014, respectively.

In July 2014, the Corporation sold its current world headquarters location. Net of transaction costs, the Corporation received cash proceeds of $13,535 from the sale, and recorded a non-cash loss on disposal of $15,544, which is reflected within “Net loss on disposal of fixed assets” in the table above. See Note 3 for further information.

Other Non-Operating Expense (Income) - Net

	2015			2014			2013
	2016			2015			2014
Impairment of investment in Schurman	$	—		$	1,935		$	—
Foreign exchange loss (gain)	$	1,800		$	1,522		$	(280	)
Gain related to investment in third party		—			(3,262	)		(4,293	)
Rental income		(567	)		(1,089	)		(1,714	)
Foreign exchange loss (gain)		1,522			(280	)		(2,783	)
Impairment of investment in Schurman		—			—			1,935
Rental income		(1,089	)		(1,714	)		(1,919	)
Gain related to investment in third party		—			—			(3,262	)
Miscellaneous		(~~114~~40	)		25(114	)		~~(179~~25	)
Other non-operating expense (income) – net	$	~~319~~1,193		$	~~(3,296~~319	)	$	(93,~~174~~296	)

In 2014, the Corporation ~~recognized~~realized a gain of $3,262 from its equity investment in a third party and an impairment loss of $1,935 associated with its investment in Schurman. See Note 1— - Consolidation for further information.

The Corporation recognized gains from its investment in a third party of $3,262 and $4,293 in 2014 and 2013, respectively. See Note 1 – Consolidation for further information.

NOTE 5 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The components of accumulated other comprehensive income (loss) and activity for 2015 and 2014 are as follows:

	ForeignCurrencyTranslationAdjustments			Pensions andPostretirementBenefits			UnrealizedInvestmentGain			Total
Balance at February 28, 2013	$	12,594		$	(29,731	)	$	4		$	(17,133	)
Other comprehensive income (loss) before reclassifications		11,561			3,413			(4	)		14,970
Amounts reclassified from accumulated other comprehensive income (loss)		984			1,931			—			2,915
Other comprehensive income (loss), net of tax		12,545			5,344			(4	)		17,885
Balance at February 28, 2014		25,139			(24,387	)		—			752
Other comprehensive income (loss) before reclassifications		(23,303	)		(2,348	)		—			(25,651	)
Amounts reclassified from accumulated other comprehensive income (loss)		—			496			—			496
Other comprehensive income (loss), net of tax		(23,303	)		(1,852	)		—			(25,155	)
Balance at February 28, 2015	$	1,836		$	(26,239	)	$	—		$	(24,403	)

NOTE 5 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The changes in accumulated other comprehensive income (loss) for 2016, 2015 and 2014 are as follows:


	Foreign Currency Translation Adjustments			Pensions and Postretirement Benefits			Unrealized Investment Gain			Total
Balance at February 28, 2013	$	12,594		$	(29,731	)	$	4		$	(17,133	)
Other comprehensive income (loss) before reclassifications		11,561			3,413			(4	)		14,970
Amounts reclassified from accumulated other comprehensive income (loss)		984			1,931			—			2,915

Other comprehensive income (loss), net of tax		12,545			5,344			(4	)		17,885

Balance at February 28, 2014		25,139			(24,387	)		—			752
Other comprehensive income (loss) before reclassifications		(23,303	)		(2,348	)		—			(25,651	)
Amounts reclassified from accumulated other comprehensive income (loss)		—			496			—			496

Other comprehensive income (loss), net of tax		(23,303	)		(1,852	)		—			(25,155	)

Balance at February 28, 2015		1,836			(26,239	)		—			(24,403	)
Other comprehensive income (loss) before reclassifications		(15,371	)		(1,029	)		20,505			4,105
Amounts reclassified from accumulated other comprehensive income (loss)		—			640			—			640

Other comprehensive income (loss), net of tax		(15,371	)		(389	)		20,505			4,745

Balance at February 29, 2016	$	(13,535	)	$	(26,628	)	$	20,505		$	(19,658	)

The reclassifications out of accumulated other comprehensive income (loss) are as follows:

	2015			2014
	2016			2015			2014
Pensions and Postretirement Benefits:
Amortization of pensions and other postretirement benefits items:
Actuarial losses, net	$	(1,~~392~~700	)	$	(21,~~442~~392	)	~~(1)~~$	(2,442	)	(1)
Prior service credit, net		~~724~~699			~~1,113~~724		~~(1)~~	1,113		(1)
Transition obligation		(54	)		(65	)	~~(1)~~	(6	)	(1)
Recognition of prior service cost upon curtailment		—			~~(1,746~~—	)	~~(1)~~	(1,746	)	(1)
		(673	)		(3,081	)
		(1,005	)		(673	)		(3,081	)
Tax benefit		~~177~~365			~~1,150~~177		~~(2)~~	1,150		(2)
Total, net of tax		(~~496~~640	)		(~~1,931~~496	)		(1,931	)
Foreign Currency Translation Adjustments:
Loss upon dissolution of business		—			~~(984~~—	)	~~(3)~~	(984	)	(3)
Total reclassifications	$	(~~496~~640	)	$	(~~2,915~~496	)	$	(2,915	)

Classification on Consolidated Statement of Income:

(1)	Administrative and general expenses

(2)	Income tax expense

(3)	Other non-operating expense (income) - net

NOTE 6 – CUSTOMER ALLOWANCES AND DISCOUNTS

In the normal course of business, the Corporation enters into agreements with certain customers for the supply of greeting cards and related products. The agreements are negotiated individually to meet competitive situations and, therefore, while some aspects of the agreements may be similar, important contractual terms may vary. Under these agreements, the customer may receive allowances and discounts including rebates, marketing allowances and various other allowances and discounts. These amounts are recorded as reductions of gross accounts receivable or included in accrued liabilities and are recognized as reductions of net sales when earned. These amounts are earned by the customer as product is purchased from the Corporation and are recorded based on the terms of individual customer contracts.

Trade accounts receivable are reported net of certain allowances and discounts. The most significant of these are as follows:

	February 28, 2015		February 28, 2014
	February 29, 2016		February 28, 2015
Allowance for seasonal sales returns	$	1821,~~895~~518	$	2618,~~613~~895
Allowance for outdated products		118,~~074~~372		911,~~692~~074
Allowance for doubtful accounts		1,~~730~~628		21,~~488~~730
Allowance for marketing funds		26,~~841~~371		2826,~~277~~841
Allowance for rebates		3424,~~214~~373		2734,~~369~~214
	$	9282,~~754~~262	$	9492,~~439~~754

Certain customer allowances and discounts are settled in cash. These accounts, primarily rebates, which are classified as “Accrued liabilities” on the Consolidated Statement of Financial Position, totaled $16,~~951~~010 and $16,~~453~~951 as of February 2829, ~~2015~~2016 and ~~2014~~February 28, 2015, respectively.

NOTE 7 – INVENTORIES

	February 28, 2015		February 28, 2014
	February 29, 2016		February 28, 2015
Raw materials	$	1413,~~809~~516	$	2014,~~915~~809
Work in process		78,~~578~~116		87,~~093~~578
Finished products		~~297~~277,~~899~~480		~~287~~297,~~481~~899
		320,286		316,489
		299,112		320,286
Less LIFO reserve		80,~~755~~159		8280,~~140~~755
		239,531		234,349
		218,953		239,531
Display material and factory supplies		98,~~046~~503		209,~~412~~046
	$	~~248~~227,~~577~~456	$	~~254~~248,~~761~~577

There were no material LIFO liquidations in ~~2014~~2016. During 2015, certain inventory quantities declined resulting in the liquidation of LIFO ~~inventory~~ layers carried at lower costs compared with current year purchases. The income statement effect of such liquidation on material, labor and other production costs was approximately $3,000. Inventory held on location for ~~retailers~~ retailers with SBT arrangements, which is included in finished products, totaled approximately $6764,000 and $63,000 as of February 29, 2016 and February 28, 2015, ~~and 2014~~respectively.

NOTE 8 –- PROPERTY, PLANT AND EQUIPMENT

	February 28, 2015		February 28, 2014
	February 29, 2016		February 28, 2015
Land	$	18,~~791~~585	$	1918,~~231~~791
Buildings		~~178~~240,~~924~~737		~~201~~178,~~619~~924
Capitalized software		~~191~~239,~~307~~364		~~174~~191,~~405~~307
Equipment and fixtures		~~439~~446,~~006~~373		~~459~~439,~~886~~006
		828,028		855,141
		945,059		828,028
Less accumulated depreciation		~~447~~477,~~731~~349		~~479~~447,~~376~~731
	$	~~380~~467,~~297~~710	$	~~375~~380,~~765~~297

During ~~2015~~2016, ~~including~~ the ~~fixed assets that were part of the AGI In-Store and world headquarters dispositions, the~~ Corporation disposed of approximately $~~138~~19,000 of property, plant and equipment that included accumulated depreciation of approximately $8618,000. During ~~2014~~2015, ~~the~~including Corporation disposed of approximately $27,000 of property, plant and equipment that included accumulated depreciation of approximately $24,000. Also, continued operating losses and negative cash flows led to testing for impairment of long-lived assets in the ~~Retail Operations segment in accordance with ASC 360. As a result,~~ fixed ~~asset~~ ~~impairment~~assets ~~charges~~that ~~of $3,660 and $258~~ were ~~recorded~~part ~~in “Selling, distribution and marketing expenses” on the Consolidated Statement~~ of ~~income for 2015 and 2014, respectively. The charges represent~~ the ~~difference between the carrying values of the assets and the future net discounted cash flows estimated to be generated by those assets.~~

Depreciation expense totaled $56,056, $50,493 and $44,326 in 2015, 2014 and 2013, respectively. Interest expense capitalized was $1,147, $3,748 and $2,355 in 2015, 2014 and 2013, respectively.

Included in “Buildings” as of February 28, 2015 in the table above is an amount related to a building that will function as the future world headquarters for the Corporation. This is in connection with an operating lease with H L & L Property Company (“H L & L”). The building is currently being constructed and expected to be available for occupancy in calendar year 2016.

H L & L is an indirect affiliate of the Corporation as it is indirectly owned by members of the Weiss Family (as defined in Note 18). Due to, among other things, the Corporation’s involvement in the construction of the building, the Corporation is required to be treated, for accounting purposes only, as the “deemed owner” of the new world headquarters building during the construction period. Accordingly, the Corporation has recorded an asset and associated offsetting liability during the construction of the building, even though the Corporation does not own the asset and is not the obligor on the corresponding construction debt. As of February 28, 2015, the asset and corresponding liability was $31,662. See Note 18 for further information.

AGI In-Store and world headquarters dispositions, the Corporation disposed of approximately $138,000 of property, plant and equipment that included accumulated depreciation of approximately $86,000. Also, continued operating losses and negative cash flows led to testing for impairment of long-lived assets in the Retail Operations segment in accordance with ASC 360. As a result, fixed asset impairment charges of $4,083 and $3,660 were recorded in “Selling, distribution and marketing expenses” on the Consolidated Statement of Income for 2016 and 2015, respectively. The charges represent the difference between the carrying values of the assets and the future net discounted cash flows estimated to be generated by those assets.

Depreciation expense totaled $50,303, $56,056 and $50,493 in 2016, 2015 and 2014, respectively. Interest expense capitalized was $2,406, $1,147 and $3,748 in 2016, 2015 and 2014, respectively.

The Corporation’s future world headquarters is being constructed under a build to suit leasing arrangement with H L & L Property Company (“H L & L”), an indirect affiliate of the Corporation as it is indirectly owned by members of the Weiss Family (as defined in Note 18). Due to, among other things, the Corporation’s involvement in the construction of the building, the Corporation is required to be treated, for accounting purposes only, as the “deemed owner” of the new world headquarters during the construction period. Accordingly, the Corporation has recorded an asset and offsetting liability during the construction of the building, even though the Corporation does not own the asset and is not the obligor on the corresponding construction debt. The construction asset included in “Buildings” in the table above and the offsetting deferred lease obligation included in “Other liabilities” on the Consolidated Statement of Financial Position, amounted to $94,727 and $31,662 as of February 29, 2016 and February 28, 2015, respectively. See Note 18 – “World headquarters relocation” for further information.

NOTE 9 – GOODWILL AND OTHER INTANGIBLE ASSETS

At February 2829, ~~2015~~2016 and ~~2014~~February 28, 2015, intangible assets, net of accumulated amortization, were $3031,~~048~~526 and $4930,~~138~~048, respectively. The following table presents information about these intangible assets, which are included in “Other assets” on the Consolidated Statement of Financial Position:

February 28, 2015

February 28, 2014

February 29, 2016

February 28, 2015

GrossCarryingAmount

AccumulatedAmortization

NetCarryingAmount

GrossCarryingAmount

AccumulatedAmortization

NetCarryingAmount

Intangible assets with indefinite useful lives:

Tradenames

6,200

—

6,200

286,~~802~~200

—

286,~~802~~200

Character property rights

11,310

—

11,310

—11,310

—

—11,310

Subtotal

17,510

—

17,510

2817,~~802~~510

—

2817,~~802~~510

Intangible assets with finite useful lives:

Patents

23,~~971~~385

(1,~~224~~529

)

1,~~747~~856

52,~~175~~971

(31,~~557~~224

)

1,~~618~~747

Trademarks

4,~~016~~125

(3,~~247~~434

)

~~769~~691

94,~~556~~016

(83,~~221~~247

)

~~1,335~~769

Artist relationships

19,230

(1519,~~178~~099

)

~~4,052~~131

19,230

(1115,~~193~~178

)

84,~~037~~052

Customer relationships

15,~~610~~472

(1012,~~192~~917

)

52,~~418~~555

1615,~~987~~610

(810,~~874~~192

)

85,~~113~~418

Other

1321,~~590~~222

(1312,~~038~~439

)

~~552~~8,783

1513,~~740~~590

(1413,~~507~~038

)

~~1,233~~552

Subtotal

5563,~~417~~434

(4249,~~879~~418

)

1214,~~538~~016

6655,~~688~~417

(4642,~~352~~879

)

2012,~~336~~538

Total

7280,~~927~~944

(4249,~~879~~418

)

3031,~~048~~526

9572,~~490~~927

(4642,~~352~~879

)

4930,~~138~~048

In ~~2015~~2016, the Corporation ~~purchased~~entered ~~certain~~into ~~Character~~an ~~Property~~exclusive ~~Rights~~character ~~for~~property ~~$37,700~~licensing agreement. AsThe ofexclusivity ~~February 28~~rights, ~~2015,~~included ~~the majority~~in of“Other” ~~these~~in ~~assets~~the ~~were~~table ~~classified~~above, aswere ~~held~~acquired for ~~sale~~$10,000 ~~related~~and toare ~~the~~being ~~expected~~amortized ~~sale~~over of the ~~Strawberry~~five ~~Shortcake~~year ~~property.~~period ~~The~~of ~~Corporation has categorized~~ the ~~remaining amount of $11,310 as character property rights with an indefinite useful life~~agreement. ~~See Note 3 for further information.~~

InDuring 2015, the Corporation ~~required~~purchased ~~annual~~certain ~~impairment~~Character ~~test~~Property ofRights ~~indefinite-lived~~for ~~intangible~~$37,700 ~~assets~~and ~~was~~recorded ~~completed in~~ the ~~fourth~~rights ~~quarter~~as ~~and based~~indefinite-lived onintangible ~~the~~assets. ~~results~~As of ~~the~~February 28, ~~testing~~2015, the ~~Corporation~~majority ~~determined~~of ~~that~~these ~~the~~assets ~~Clinton~~were ~~Cards~~reclassified ~~tradename~~as ~~was~~held ~~impaired.~~for ~~The~~sale ~~Corporation~~due ~~tests~~to ~~tradenames using~~ the ~~relief~~pending ~~from royalty method. The fair value~~ sale of ~~this~~the ~~asset~~Strawberry ~~was~~Shortcake ~~considered~~property, awith ~~Level~~the 2remaining ~~valuation~~amount ~~as it was based on observable market royalty rates~~ of ~~similar intangibles. As a result~~$11,310 ~~the~~categorized ~~Corporation~~as ~~recorded~~character aproperty ~~non-cash~~rights ~~impairment~~with ~~charge~~an ofindefinite ~~$21,924~~useful ~~(£13,500) reducing~~life. ~~the~~See ~~tradename~~Note ~~balance~~3 tofor ~~zero~~further information.

As a consequence of the impairment of all goodwill for financial reporting purposes in 2012, the excess tax deductible goodwill remaining from the 2009 acquisition of Recycled Paper Greetings, Inc. is being recognized as a reduction of other intangible assets when such benefits are realized for income tax purposes. Reductions of other intangible assets resulting from the realization of excess tax deductible goodwill in 2015 and 2014 totaled $4,346 and $2,749, respectively, and are included in “Accumulated Amortization” in the table above.

Amortization expense for intangible assets totaled $3,797, $4,532 and $5,079 in 2015, 2014 and 2013, respectively. Estimated annual amortization expense for the next five years will approximate $3,291 in 2016, $2,920 in 2017, $2,845 in 2018, $2,736 in 2019 and $2,588 in 2020.

In 2015, the required annual impairment test of indefinite-lived intangible assets was completed in the fourth quarter and based on the results of the testing the Corporation determined that the Clinton Cards tradename was impaired. The Corporation tests tradenames using the relief from royalty method. The fair value of this asset was considered a Level 2 valuation as it was based on observable market royalty rates of similar intangibles. As a result, the Corporation recorded a non-cash impairment charge of $21,924 (£13,500), which reduced the tradename balance to zero. This non-cash impairment charge is reported in “Goodwill and other intangible assets impairment” in the Consolidated Statement of Income and Consolidated Statement of Cash Flows for the year ended February 28, 2015.

In 2014, the required annual impairment test of indefinite-lived intangible assets was completed in the fourth quarter and based on the results of the testing the Corporation determined that the goodwill portion of the intangibles associated with the acquisition of Clinton Cards was impaired. As a result, the Corporation recorded a non-cash impairment charge of $733 (£465), which reduced the goodwill balance to zero. This non-cash impairment charge is reported in “Goodwill and other intangible assets impairment” in the Consolidated Statement of Income and Consolidated Statement of Cash Flows for the year ended February 28, 2014.

As a consequence of the impairment of all goodwill for financial reporting purposes in 2012, the excess tax deductible goodwill remaining from the 2009 acquisition of Recycled Paper Greetings, Inc. is being recognized as a reduction of other intangible assets when such benefits are realized for income tax purposes. Reductions of other intangible assets resulting from the realization of excess tax deductible goodwill totaled $4,346 in 2016 and 2015, and are included in “Accumulated Amortization” in the table above.

Amortization expense for intangible assets totaled $5,431, $3,797 and $4,532 in 2016, 2015 and 2014, respectively. Estimated annual amortization expense for the next five years will approximate $4,022 in 2017, $2,899 in 2018, $2,794 in 2019, $2,669 in 2020 and $553 in 2021.

NOTE 10 – DEFERRED COSTS

In the normal course of its business, the Corporation enters into agreements with certain customers for the supply of greeting cards and related products. The agreements are negotiated individually to meet competitive situations and, therefore, while some aspects of the agreements may be similar, important contractual terms may vary. Under these agreements, the customer may receive a combination of cash payments, credits, discounts, allowances and other incentive considerations to be earned by the customer as product is purchased from the Corporation over the stated term of the agreement or the minimum purchase volume commitment. In the event an agreement is not completed, in most instances, the Corporation has a claim for unearned advances under the agreement. The agreements may or may not specify the Corporation as the sole supplier of social expression products to the customer. See Note 1 – Deferred Costs for further information.

A portion of the total consideration may not be paid by the Corporation at the time the agreement is consummated. All future payment commitments are classified as liabilities at inception until paid. The payments that are expected to be made in the next twelve months are classified as “Other current liabilities” on the Consolidated Statement of Financial Position and the remaining payment commitments beyond the next twelve months are classified as “Other liabilities.” The Corporation maintains ana general allowance for deferred ~~costs~~ costs related to supply agreements of $23,~~300~~571 and $42,~~100~~300 at February 2829, ~~2015~~2016 and ~~2014~~February 28, 2015, respectively. This allowance is included in “Other assets” on the Consolidated Statement of Financial Position.

~~Deferred~~Circumstances may arise, particularly with a fixed term agreement, whereby the future economic benefit expected by the Corporation, as negotiated within specific customer agreements, is lower than initially anticipated. If this occurs, the deferred costs ~~and~~capitalized at the inception of the agreement for incentives committed to the customer may exceed the lower-than-expected future ~~payment~~benefit. ~~commitments~~Such ~~were~~an event occurred in the fourth quarter of 2016 and consequently, the Corporation recorded an impairment charge of $8,510. In 2015, due to the bankruptcy of a single customer, the Corporation recorded an impairment charge of $4,422, of which $853 was subsequently recovered in 2016. The recovery as ~~follows:~~well as the non-cash impairment charges were reflected within “Net sales” on the Consolidated Statement of Income for the years then ended.

	February 28, 2015			February 28, 2014
Prepaid expenses and other	$	98,061		$	100,282
Other assets		364,311			428,090
Deferred cost assets		462,372			528,372
Other current liabilities		(59,018	)		(84,860	)
Other liabilities		(104,127	)		(149,190	)
Deferred cost liabilities		(163,145	)		(234,050	)
Net deferred costs	$	299,227		$	294,322

A summary of the changes in the carrying amount of the Corporation’s net deferred costs during the years ended February 28, 2015, 2014 and 2013 is as follows:

Balance at February 29, 2012	$	306,217
Payments		82,474
Amortization		(109,543	)
Effective settlement of Clinton Cards contract upon acquisition		(6,192	)
Currency translation		(359	)
Balance at February 28, 2013		272,597
Payments		130,970
Amortization		(108,761	)
Currency translation		(484	)
Balance at February 28, 2014		294,322
Payments		124,258
Amortization		(114,125	)
Contract asset impairment		(4,422	)
Currency translation		(806	)
Balance at February 28, 2015	$	299,227

Deferred costs and future payment commitments were as follows:


	February 29, 2016			February 28, 2015
Prepaid expenses and other	$	92,639		$	98,061
Other assets		378,223			364,311

Deferred cost assets		470,862			462,372

Other current liabilities		(47,142	)		(59,018	)
Other liabilities		(145,856	)		(104,127	)

Deferred cost liabilities		(192,998	)		(163,145	)

Net deferred costs	$	277,864		$	299,227

A summary of the changes in the carrying amount of the Corporation’s net deferred costs during the years ended February 29, 2016, February 28, 2015 and February 28, 2014 is as follows:


Balance at February 28, 2013	$	272,597
Payments		130,970
Amortization		(108,761	)
Currency translation		(484	)

Balance at February 28, 2014		294,322
Payments		124,258
Amortization		(114,125	)
Contract asset impairment		(4,422	)
Currency translation		(806	)

Balance at February 28, 2015		299,227
Payments		108,290
Amortization		(121,169	)
Contract asset impairment, net of recovery		(7,657	)
Currency translation		(827	)

Balance at February 29, 2016	$	277,864

NOTE 11 – DEBT

~~There~~Long-term ~~was no~~ debt ~~due~~and ~~within~~their ~~one~~related calendar year due dates as of February 2829, ~~2015.~~2016 ~~Debt~~and ~~due within one year totaled $20,000 as of~~ February 28, ~~2014~~2015, ~~which~~ ~~represented~~respectively, ~~the~~were ~~current~~as follows: ~~maturity of the term loan.~~

Long-term debt and their related calendar year due dates as of February 28, 2015 and 2014, respectively, were as follows:


	February 29, 2016			February 28, 2015
Term loan, due 2019	$	185,000		$	250,000
7.375% senior notes, due 2021		225,000			225,000
Revolving credit facility, due 2018		—			4,300
6.10% senior notes, due 2028		181			181
Unamortized financing fees		(3,863	)		(6,752	)

	$	406,318		$	472,729

	February 28, 2015			February 28, 2014
Term loan, due 2019	$	250,000		$	340,000
7.375% senior notes, due 2021		225,000			225,000
Revolving credit facility, due 2018		4,300			4,500
6.10% senior notes, due 2028		181			181
Unamortized financing fees		(6,752	)		(10,567	)
		472,729			559,114
Current portion of term loan		—			(20,000	)
	$	472,729		$	539,114

At February 29, 2016, the interest rate on the outstanding term loan balance was 2.9%. In addition to the outstanding borrowings presented in the table above, the Corporation also finances certain transactions with some of its vendors, which include a combination of various guaranties and letters of credit. At February 29, 2016, the Corporation had credit arrangements under a credit facility and an accounts receivable facility to support the letters of credit up to $148,800 with $26,490 outstanding.

AtAggregate ~~February 28,~~maturities ~~2015,~~of ~~the balances outstanding on the revolving credit facility and the~~ long-term ~~loan~~debt, ~~facility~~by ~~bear~~fiscal ~~interest at a rate of approximately 2.6% and 2.7%~~year, ~~respectively.~~for ~~In addition to~~ the ~~balances~~five ~~outstanding~~years onsubsequent ~~the~~to ~~aforementioned agreements, the Corporation also finances certain transactions with some of its vendors, which include a combination of various guaranties and letters of credit. At~~ February 2829, ~~2015,~~2016 ~~the~~are ~~Corporation~~as follows: ~~had credit arrangements under a credit facility and an accounts receivable facility to support the letters of credit up to $123,500 with $27,668 of credit outstanding.~~

Aggregate maturities of long-term debt, by fiscal year, for the five years subsequent to February 28, 2015 are as follows:


2017	$	—
2018		—
2019		—
2020		185,000
2021		—

2016	$	—
2017		—
2018		—
2019		14,300
2020		240,000

Cash paid for interest on debt was $24,275, $31,331 and $46,869 in 2016, 2015 and 2014, respectively.

7.375% Senior Notes Due 2021

On November 30, 2011, the Corporation closed a public offering of $225,000 aggregate principal amount of 7.375% senior notes due 2021 (the “2021 Senior Notes”). The net proceeds from this offering were used to redeem other existing debt.

The 2021 Senior Notes will mature on December 1, 2021 and bear interest at a fixed rate of 7.375% per year. The 2021 Senior Notes constitute general unsecured senior obligations of the Corporation. The 2021 Senior Notes rank senior in right of payment to all future obligations of the Corporation that are, by their terms, expressly subordinated in right of payment to the 2021 Senior Notes and pari passu in right of payment with all existing and future unsecured obligations of the Corporation that are not so subordinated. The 2021 Senior Notes are effectively subordinated to secured indebtedness of the Corporation, including borrowings under its Credit Facilities described below, to the extent of the value of the assets securing such indebtedness. The 2021 Senior Notes also contain certain restrictive covenants that are customary for similar credit arrangements, including covenants that limit the Corporation’s ability to incur additional debt; declare or pay dividends; make distributions on or repurchase or redeem capital stock; make certain investments; enter into transactions with affiliates; grant or permit liens; sell assets; enter into sale and leaseback transactions; and consolidate, merge or sell all or substantially all of the Corporation’s assets. These restrictions are subject to customary baskets and financial covenant tests.

The total fair value of the Corporation’s publicly traded debt, which was considered a Level 1 valuation as it was based on quoted market prices, was $~~238~~229,~~242~~636 (at a carrying value of $225,181) and $~~234~~238,~~698~~242 (at a carrying value of $225,181) at February 2829, ~~2015~~2016 and ~~2014~~February 28, 2015, respectively.

Credit Facilities

In connection with the closing of the Merger, on August 9, 2013, the Corporation entered into a $600,000 secured credit agreement (“Credit Agreement”), which provides for a $350,000 term loan facility (“Term Loan Facility”) and a $250,000 revolving credit facility (“Revolving Credit Facility” and, together with the Term Loan Facility, the “Credit Facilities”). The Term Loan Facility was fully drawn on the Merger Date and was issued at a discount of $10,750. The Term Loan Facility requires the Corporation to make quarterly payments of $5,000 through May, 31, 2019 and a final payment of $235,000 on August 9, 2019. Voluntary prepayments without penalty or premium are permitted. During 2016 and 2015 the Corporation made voluntary prepayments of $65,000 and $75,000, respectively, on the Term Loan Facility, thereby ~~postponing~~eliminating ~~the~~all ~~next~~future ~~quarterly~~payments ~~installment~~prior ~~payment~~ to ~~November 30,~~this ~~2018~~facility’s due date in 2020. The Corporation may elect to increase the commitments under each of the Term Loan Facility and the Revolving Credit Facility up to an aggregate amount of $150,000. The proceeds of the term loans and the revolving loans borrowed on the Merger Date were used to fund a portion of the Merger consideration and pay fees and expenses associated therewith. Revolving loans borrowed under the Credit Agreement after the Merger Date were used for working capital and general corporate purposes. ~~Subsequent to year-end, in March 2015, the Corporation made additional prepayments on the Term Loan Facility. See Note 20 for further information.~~

On January 24, 2014, the Corporation amended the Credit Agreement to among other things, permit (i) specified corporate elections and tax distributions associated with a conversion from a “C corporation” to an “S corporation’” for U.S. federal income tax purposes (the Corporation has not elected “S corporation” status and continues to operate as a “C corporation”), (ii) to make a one-time restricted payment of up to $50,000 to Parent and recurring restricted payments to enable the payment of current interest on the PIK Notes (as defined in Note 18), and (iii) to make certain additional capital expenditures each year primarily related to the Corporation’s information systems refresh project. The Credit Agreement was further amended on September 5, 2014. This amendment modified the Credit Agreement to among other things (i) reduce the interest rates applicable to the term loan and revolving loans, (ii) eliminate the London Interbank Offered Rate (“LIBOR”) floor interest rate used in the determination of interest charged on Eurodollar revolving loans, (iii) reduce the commitment fee applicable to unused revolving commitments and (iv) reset the usage term of the general restricted payment basket with effect from September 5, 2014. As a result of this amendment, certain changes in the syndicated lending group and the voluntary prepayments made on the term loan facility, the Corporation expensed $2,780 of unamortized financing fees and issuance costs in 2015. An additional $1,875 was expensed in the current year as a result of the voluntary prepayments made during 2016.

The obligations under the Credit Agreement are guaranteed by the Corporation’s Parent and material domestic subsidiaries and are secured by substantially all of the assets of the Corporation and the guarantors.

The interest rate per annum applicable to the loans under the Credit Facilities are, at the Corporation’s election, equal to either (i) the base rate plus the applicable margin or (ii) the relevant adjusted Eurodollar rate for an interest period of one, two, three or six months, at the Corporation’s election, plus the applicable margin.

The Credit Agreement contains certain customary covenants, including covenants that limit the ability of the Corporation, its subsidiaries and the Parent to, among other things, incur or suffer to exist certain liens; make investments; enter into consolidations, mergers, acquisitions and sales of assets; incur or guarantee additional indebtedness; make distributions; enter into agreements that restrict the ability to incur liens or make distributions; and engage in transactions with affiliates. In addition, the Credit Agreement contains financial covenants that require the Corporation to maintain a total leverage ratio and interest coverage ratio in accordance with the limits set forth therein.

Accounts Receivable Facility

The Corporation is also a party to an accounts receivable facility that provides available funding of up to $50,000, under which there were no borrowings outstanding as of February 2829, ~~2015~~2016 and ~~2014~~February 28, 2015.

Under the terms of the accounts receivable facility, the Corporation sells accounts receivable to AGC Funding Corporation (a wholly-owned, consolidated subsidiary of the Corporation), which in turn sells participating interests in eligible accounts receivable to third party financial institutions as part of a process that provides funding to the Corporation similar to a revolving credit facility. The accounts receivable facility has a scheduled termination date of ~~August~~July 727, ~~2015~~2016 and then must be renewed annually thereafter. Borrowings on the accounts receivable facility typically bear interest based on the one-month LIBOR plus 40 basis points.

The accounts receivable facility contains representations, warranties, covenants and indemnities customary for facilities of this type, including the obligation of the Corporation to maintain the same consolidated leverage ratio as it is required to maintain under its Credit Agreement.

The total fair value of the Corporation’s non-publicly traded debt, which was considered a Level 2 valuation as it was based on comparable privately traded debt prices, was $~~251~~185,~~789~~000 (at a principal carrying value of $~~254~~185,~~300~~000) and $~~344~~251,~~500~~789 (at a principal carrying value of $~~344~~254,~~500~~300) at February 2829, ~~2015~~2016 and ~~2014~~February 28, 2015, respectively.

At February 2829, ~~2015~~2016, the Corporation was in compliance with the financial covenants under its borrowing agreements described above.

NOTE 12 – RETIREMENT AND POSTRETIREMENT BENEFIT PLANS

~~The~~Prior to January 1, 2016, the Corporation ~~has~~sponsored a discretionary profit-sharing plan with a contributory 401(k) provision covering most of its United States employees. ~~Corporate~~ ~~contributions~~Under tothis ~~the profit-sharing plan were $9~~arrangement,~~180,~~ ~~$9,149 and $7,536 for 2015, 2014 and 2013, respectively. In addition,~~ the Corporation ~~matches~~made aseparate ~~portion~~discretionary ofprofit ~~employee~~sharing and 401(k) ~~contributions. The Corporation’s~~ matching contributions ~~were~~ $4annually,~~575,~~ ~~$5,070~~after ~~and~~fiscal $6year-end,~~273~~ ~~for~~depending ~~2015,~~on ~~2014~~its ~~and~~financial ~~2013, respectively~~results.

~~The~~Effective ~~Corporation~~January 1, ~~also~~2016, ~~has~~the ~~defined~~existing ~~contribution~~profit ~~plans~~sharing ~~that~~and ~~cover~~401(k) ~~certain~~retirement ~~employees~~savings ~~in the~~plan ~~United~~was ~~Kingdom~~replaced with a safe harbor 401(k) arrangement. ~~Under~~Pursuant ~~these~~to the ~~plans~~new arrangement, the ~~employees~~matching ~~contribute~~contributions tobecame ~~the~~non-discretionary, ~~plans~~were increased, and ~~the~~are ~~Corporation~~now ~~matches~~made athroughout ~~portion~~the ofyear, ~~the~~rather ~~employee~~than ~~contributions~~on an annual basis. The increased matching contributions effectively replace the Corporation’s discretionary ~~matching~~profit sharing contributions, which were ~~$2,558,~~discontinued $2for fiscal years ending after February 29,~~124~~ 2016. The combined expense attributable to the profit sharing and ~~$1,970~~employer ~~for~~matching ~~2015~~401(k) contributions in 2016, 2015 and 2014 were $14,200, $13,755 and ~~2013~~$14, 219, respectively.

The Corporation also participates in a multiemployer pension plan covering certain domestic employees who are part of a collective bargaining agreement. Total pension expense for the multiemployer plan, representing contributions to the plan, was $586, $582 and $544 in 2015, 2014 and 2013, respectively.

The Corporation has nonqualified deferred compensation plans that previously enabled certain officers and directors with the opportunity to defer receipt of compensation and director fees, respectively, including compensation received in the form of the Corporation’s common shares. The Corporation generally funded these deferred compensation liabilities by making contributions to a rabbi trust. On December 8, 2011, the Corporation froze the deferred compensation plans. Accordingly, participants are no longer permitted to make new deferral elections, although deferral elections previously made will continue to be honored and amounts already deferred may be re-deferred in accordance with deferred compensation plans. In connection with the Merger, shares of the Corporation’s common stock held in the rabbi trust were redeemed for cash and reallocated to other participant-directed investment options within the trust. Additionally, the memorandum restricted stock units credited to certain participants’ accounts were converted to future cash-settled obligations. See Note 14 for further information.

In 2001, in connection with its acquisition of Gibson Greetings, Inc. (“Gibson”), the Corporation assumed the obligations and assets of Gibson’s defined benefit pension plan (the “Gibson Retirement Plan”) that covered substantially all Gibson employees who met certain eligibility requirements. Benefits earned under the Gibson Retirement Plan have been frozen and participants no longer accrue benefits after December 31, 2000. The Gibson Retirement Plan has a measurement date of February 28 or 29. The Corporation contributed $3,518 to the plan in 2015. No contributions were made to the plan in either 2014 or 2013. The Gibson Retirement Plan was underfunded at February 28, 2015 and 2014.

~~arising~~The ~~from~~Corporation ~~the~~also ~~recognition~~has ofdefined ~~previously~~contribution ~~recorded~~plans ~~prior~~that ~~service~~cover ~~costs~~certain ~~was~~employees ~~included~~ in ~~net~~the ~~periodic~~United ~~benefit cost in 2014~~Kingdom. ~~The amendment did not affect the benefits of participants who retired or~~Under ~~separated~~these ~~from~~plans, the ~~Corporation~~employees ~~with~~contribute ~~a deferred vested benefit prior~~ to ~~December 31, 2013.~~the Inplans ~~accordance~~and ~~with~~ the ~~SERP’s~~Corporation ~~vesting~~matches ~~provisions, certain active participants became fully vested in their SERP benefit as~~ a ~~result~~portion of the ~~Merger.~~ ~~This~~employee ~~accelerated~~contributions. ~~vesting~~The ~~increased the SERP~~Corporation’s ~~benefit~~matching ~~obligation~~contributions bywere $2,~~613~~293, $2,558 and ~~was~~$2,124 ~~recognized~~for as2016, an2015 ~~actuarial~~and ~~loss within accumulated other comprehensive income in~~ 2014., ~~The Supplemental Executive Retirement Plan has a measurement date of February 28 or 29~~respectively.

The Corporation also ~~has~~participates ~~several~~in ~~defined benefit pension plans and one defined contribution plan at its Canadian subsidiary. These include~~ a ~~defined~~multiemployer ~~benefit~~ pension plan covering ~~most~~certain ~~Canadian~~domestic ~~salaried~~ employees, ~~which~~who was closed to new participants effective January 1, 2006, but eligible members continue to accrue benefits and an hourly plan in which benefits earned have been frozen and participants no longer accrue benefits after March 1, 2000. There are ~~also~~part ~~two~~of ~~unfunded defined benefit plans, one that covers~~ a ~~supplemental executive retirement pension relating to an employment agreement and one that pays supplemental pensions to certain former hourly employees pursuant to a prior~~ collective bargaining agreement. ~~Effective~~Total pension ~~January 1,~~expense ~~2006,~~for athe ~~defined~~multiemployer ~~contribution~~ plan, ~~was~~representing ~~established~~contributions ~~and~~to ~~integrated with~~ the ~~defined benefit salaried~~ plan~~. Under the defined contribution plan~~, ~~the~~was ~~Corporation fully matches employee contributions which can range between 2% and 4% of eligible compensation. The Corporation’s matching contributions were~~ $~~354~~595, $~~378~~586 and $~~359~~582 ~~for~~in ~~2015~~2016, ~~2014~~2015 and ~~2013~~2014, respectively. ~~All defined benefit plans have a measurement date of February 28 or 29.~~

In 2001, in connection with its acquisition of Gibson Greetings, Inc. (“Gibson”), the Corporation assumed the obligations and assets of Gibson’s defined benefit pension plan (the “Gibson Retirement Plan”) that covered substantially all Gibson employees who met certain eligibility requirements. Benefits earned under the Gibson Retirement Plan have been frozen and participants no longer accrue benefits after December 31, 2000. The Gibson Retirement Plan has a measurement date of February 28 or 29. The Corporation contributed $4,516 and $3,518 to the plan in 2016 and 2015, respectively. No contributions were made to the plan in 2014. The Gibson Retirement Plan was underfunded at February 29, 2016 and February 28, 2015.

The Corporation also has an unfunded nonqualified defined benefit pension plan (the “Supplemental Executive Retirement Plan” or “SERP”) covering certain management employees. Effective December 31, 2013, the Corporation amended the SERP to freeze the accrued benefit for all active participants and closed the plan to new participants. As a result, the liabilities of the SERP were re-measured as of December 31, 2013, and a curtailment gain of $7,164 was recognized in 2014 as a reduction of actuarial losses within accumulated other comprehensive income and a corresponding reduction in the SERP’s overall benefit obligation. In addition, a non-cash loss of $1,746 arising from the recognition of previously recorded prior service costs was included in net periodic benefit cost in 2014. The amendment did not affect the benefits of participants who retired or separated from the Corporation with a deferred vested benefit prior to December 31, 2013. In accordance with the SERP’s vesting provisions, certain active participants became fully vested in their SERP benefit as a result of the Merger. This accelerated vesting increased the SERP’s benefit obligation by $2,613 and was recognized as an actuarial loss within accumulated other comprehensive income in 2014. The Supplemental Executive Retirement Plan has a measurement date of February 28 or 29.

The Corporation also has several defined benefit pension plans and one defined contribution plan at its Canadian subsidiary. These include a defined benefit pension plan covering most Canadian salaried employees, which was closed to new participants effective January 1, 2006, but eligible members continue to accrue benefits and an hourly plan in which benefits earned have been frozen and participants no longer accrue benefits after March 1, 2000. There are also two unfunded defined benefit plans, one that covers a supplemental executive retirement pension relating to an employment agreement and one that pays supplemental pensions to certain former hourly employees pursuant to a prior collective bargaining agreement. Effective January 1, 2006, a defined contribution plan was established and integrated with the defined benefit salaried plan. Under the defined contribution plan, the Corporation fully matches employee contributions which can range between 2% and 4% of eligible compensation. The Corporation’s matching contributions were $319, $354 and $378 for 2016, 2015 and 2014, respectively. All defined benefit plans have a measurement date of February 28 or 29.

The Corporation sponsors a defined benefit health care plan that provides postretirement medical benefits to full-time United States employees who meet certain age, service and other requirements. The plan is contributory, with retiree contributions adjusted periodically, and contains other cost-sharing features such as deductibles and coinsurance. The Corporation maintains a trust for the payment of retiree health care benefits. This trust is funded at the discretion of management. The plan has a measurement date of February 28 or 29.

The following table sets forth summarized information on the defined benefit pension plans and postretirement benefits plan:

	Defined BenefitPension Plans						Postretirement Benefits Plan
	2015			2014			2015			2014
Change in benefit obligation:
Benefit obligation at beginning of year	$	184,786		$	188,146		$	66,632		$	67,452
Service cost		683			1,115			368			431
Interest cost		7,249			7,065			2,545			2,397
Participant contributions		16			20			3,282			3,485
Retiree drug subsidy payments		—			—			590			796
Plan amendments		580			414			—			—
Actuarial loss (gain)		14,137			6,043			(4,387	)		(1,470	)
Change in control		—			2,613			—			—
Plan curtailment		—			(7,164	)		—			—
Benefit payments		(11,431	)		(11,519	)		(5,888	)		(6,459	)
Currency exchange rate changes		(3,227	)		(1,947	)		—			—
Benefit obligation at end of year		192,793			184,786			63,142			66,632
Change in plan assets:
Fair value of plan assets at beginning of year		104,894			104,521			48,757			51,794
Actual return on plan assets		12,188			11,386			2,313			3,255
Employer contributions		5,612			2,199			(3,282	)		(3,485	)
Participant contributions		16			20			3,282			3,485
Benefit payments		(11,431	)		(11,519	)		(5,470	)		(6,292	)
Currency exchange rate changes		(2,986	)		(1,713	)		—			—
Fair value of plan assets at end of year		108,293			104,894			45,600			48,757
Funded status at end of year	$	(84,500	)	$	(79,892	)	$	(17,542	)	$	(17,875	)

The following table sets forth summarized information on the defined benefit pension plans and postretirement benefits plan:


	Defined Benefit Pension Plans						Postretirement Benefits Plan
	2016			2015			2016			2015
Change in benefit obligation:
Benefit obligation at beginning of year	$	192,793		$	184,786		$	63,142		$	66,632
Service cost		710			683			335			368
Interest cost		6,186			7,249			2,028			2,545
Participant contributions		10			16			3,042			3,282
Retiree drug subsidy payments		—			—			467			590
Plan amendments		—			580			—			—
Actuarial (gain) loss		(4,427	)		14,137			(5,594	)		(4,387	)
Benefit payments		(11,299	)		(11,431	)		(5,448	)		(5,888	)
Currency exchange rate changes		(1,868	)		(3,227	)		—			—

Benefit obligation at end of year		182,105			192,793			57,972			63,142
Change in plan assets:
Fair value of plan assets at beginning of year		108,293			104,894			45,600			48,757
Actual return on plan assets		(2,646	)		12,188			(129	)		2,313
Employer contributions		6,547			5,612			(3,042	)		(3,282	)
Participant contributions		10			16			3,042			3,282
Benefit payments		(11,299	)		(11,431	)		(5,261	)		(5,470	)
Currency exchange rate changes		(1,686	)		(2,986	)		—			—

Fair value of plan assets at end of year		99,219			108,293			40,210			45,600

Funded status at end of year	$	(82,886	)	$	(84,500	)	$	(17,762	)	$	(17,542	)

Amounts recognized on the Consolidated Statement of Financial Position consist of the following:

	Defined BenefitPension Plans						~~Postretirement~~PostretirementBenefits ~~Benefits~~ Plan
	2015			2014			2015			2014
	2016			2015			2016			2015
Accrued compensation and benefits	$	(2,~~639~~647	)	$	(2,~~624~~639	)	$	—		$	—
Other liabilities		(8180,~~861~~239	)		(7781,~~268~~861	)		(17,~~542~~762	)		(17,~~875~~542	)
Net amount recognized	$	(8482,~~500~~886	)	$	(7984,~~892~~500	)	$	(17,~~542~~762	)	$	(17,~~875~~542	)
Amounts recognized in accumulated other comprehensive (income) loss
Amounts recognized in accumulated other comprehensive (income) loss:
Net actuarial loss (gain)	$	6869,~~372~~217		$	6368,~~614~~372		$	(1920,~~396~~472	)	$	(1719,~~013~~396	)
Net prior service cost (credit)		—			—			(43,~~173~~473	)		(54,~~477~~173	)
Net transition obligation		1610			2316			—			—
Accumulated other comprehensive loss (income)	$	6869,~~388~~227		$	6368,~~637~~388		$	(23,~~569~~945	)	$	(2223,~~490~~569	)

For the defined benefit pension plans, the estimated net loss and transition obligation that will be amortized from accumulated other comprehensive loss into net periodic benefit cost over the next fiscal year are approximately $3,~~380~~474 and $54, respectively. Unrecognized actuarial gains and losses in excess of 10% of the greater of the benefit obligation or plan assets are amortized over the average remaining future service period of active participants or the life expectancy of inactive participants, as appropriate.

For the postretirement benefits plan, the estimated net gain and prior service credit that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year are approximately ($1,~~190~~470) and ($700), respectively. The unrecognized net gain in excess of 10% of the greater of the benefit obligation or plan assets is amortized over the average future service period of active participants expected to receive benefits. Prior service credits are amortized straight-line beginning at the date of each plan amendment over the average future service period of the affected plan participants expected to receive benefits.

The following table presents significant weighted-average assumptions to determine benefit obligations and net periodic benefit cost:

	Defined BenefitPension Plans						PostretirementBenefits Plan
	2015			2014			2015			2014
Weighted average discount rate used to determine:
Benefit obligations at measurement date
U.S.		3.25-3.50	%		4.00-4.25	%		3.50	%		4.25	%
International		3.40	%		4.05	%		N/A			N/A
Net periodic benefit cost
U.S.		4.00-4.25	%		3.75-4.50	%		4.25	%		3.75	%
International		4.05	%		3.90	%		N/A			N/A
Expected long-term return on plan assets:
U.S.		6.75	%		6.75	%		6.50	%		6.50	%
International		5.25	%		5.00	%		N/A			N/A
Rate of compensation increase:
U.S.		N/A			6.50	%		N/A			N/A
International		3.00	%		3.00	%		N/A			N/A
Health care cost trend rates:
For year following February 28 or 29		N/A			N/A			8.00	%		8.50	%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)		N/A			N/A			5.00	%		5.00	%
Year the rate reaches the ultimate trend rate		N/A			N/A			2021			2021

For 2015 and 2014, the net periodic pension cost for the defined benefit pension plans was based on long-term asset rates of return as noted above. In developing these expected long-term rate of return assumptions, consideration was given to expected returns based on the current investment policy, current mix of investments and historical return for the asset classes.

~~For~~The ~~2015~~following ~~and~~table ~~2014,~~presents ~~the~~significant ~~Corporation assumed a long~~weighted-~~term~~average ~~asset~~assumptions ~~rate of return of 6.50%~~ to ~~calculate~~determine ~~the expected return for the postretirement~~ benefit ~~plan.~~obligations Inand developing the expected long-term rate of return assumption, consideration was given to various factors, including a review of asset class return expectations based on historical compounded returns fornet ~~such~~periodic ~~asset~~benefit ~~classes.~~cost:

	2015			2014
	Defined BenefitPension Plans						PostretirementBenefits Plan
Effect of a 1% increase in health care cost trend rate on:
	2016			2015			2016			2015
Service cost plus interest cost	$	82		$	80
Weighted average discount rate used to determine:
Accumulated postretirement benefit obligation		2,083			2,462
Benefit obligations at measurement date
Effect of a 1% decrease in health care cost trend rate on:
U.S.		3.50-3.75	%		3.25-3.50	%		3.75	%		3.50	%
Service cost plus interest cost		(72	)		(70	)
International		3.70	%		3.40	%		N/A			N/A
Accumulated postretirement benefit obligation		(1,798	)		(2,139	)
Net periodic benefit cost
U.S.		3.25-3.50	%		4.00-4.25	%		3.50	%		4.25	%
International		3.40	%		4.05	%		N/A			N/A
Expected long-term return on plan assets:
U.S.		6.75	%		6.75	%		6.50	%		6.50	%
International		4.50	%		5.25	%		N/A			N/A
Rate of compensation increase:
U.S.		N/A			N/A			N/A			N/A
International		3.00	%		3.00	%		N/A			N/A
Health care cost trend rates:
For year following February 28 or 29		N/A			N/A			7.50	%		8.00	%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)		N/A			N/A			5.00	%		5.00	%
Year the rate reaches the ultimate trend rate		N/A			N/A			2021			2021

For 2016 and 2015, the net periodic pension cost for the defined benefit pension plans was based on long-term asset rates of return as noted above. In developing these expected long-term rate of return assumptions, consideration was given to expected returns based on the current investment policy, current mix of investments and historical return for the asset classes.

For 2016 and 2015, the Corporation assumed a long-term asset rate of return of 6.50% to calculate the expected return for the postretirement benefit plan. In developing the expected long-term rate of return assumption, consideration was given to various factors, including a review of asset class return expectations based on historical compounded returns for such asset classes.


	2016			2015
Effect of a 1% increase in health care cost trend rate on:
Service cost plus interest cost	$	67		$	82
Accumulated postretirement benefit obligation		2,046			2,083
Effect of a 1% decrease in health care cost trend rate on:
Service cost plus interest cost		(67	)		(72	)
Accumulated postretirement benefit obligation		(1,788	)		(1,798	)

The following table presents selected defined benefit pension plan information:

	2015		2014
	2016		2015
For all defined benefit pension plans:
Accumulated benefit obligation	$	~~192~~182,~~774~~099	$	~~184~~192,~~769~~774
For defined benefit pension plans that are not fully funded:
Projected benefit obligation		~~169~~182,~~803~~050		~~184~~169,~~527~~803
Accumulated benefit obligation		~~169~~182,~~803~~044		~~184~~169,~~510~~803
Fair value of plan assets		8599,~~052~~164		~~104~~85,~~635~~052

A summary of the components of net periodic benefit cost for the defined benefit pension plans is as follows:

	2015			2014			2013
Components of net periodic benefit cost:
Service cost	$	683		$	1,115		$	1,369
Interest cost		7,249			7,065			7,394
Expected return on plan assets		(6,522	)		(6,267	)		(6,473	)
Amortization of transition obligation		5			6			7
Amortization of prior service cost		580			190			240
Amortization of actuarial loss		2,827			3,485			3,514
Recognition of prior service cost upon curtailment		—			1,746			—
Net periodic benefit cost		4,822			7,340			6,051
Other changes in plan assets and benefit obligations recognized in other comprehensive income:
Actuarial loss		8,610			941			5,657
Prior service cost		580			414			231
Amortization of prior service cost		(580	)		(190	)		(240	)
Amortization of actuarial loss		(2,827	)		(3,485	)		(3,514	)
Amortization of transition obligation		(5	)		(6	)		(7	)
Change in control		—			2,613			—
Curtailment gain		—			(7,164	)		—
Recognition of prior service cost upon curtailment		—			(1,746	)		—
Total recognized in other comprehensive income		5,778			(8,623	)		2,127
Total recognized in net periodic benefit cost and other comprehensive income	$	10,600		$	(1,283	)	$	8,178

A summary of the components of net periodic benefit cost for the defined benefit pension plans is as follows:


	2016			2015			2014
Components of net periodic benefit cost:
Service cost	$	710		$	683		$	1,115
Interest cost		6,186			7,249			7,065
Expected return on plan assets		(6,581	)		(6,522	)		(6,267	)
Amortization of transition obligation		4			5			6
Amortization of prior service cost		—			580			190
Amortization of actuarial loss		3,402			2,827			3,485
Recognition of prior service cost upon curtailment		—			—			1,746

Net periodic benefit cost		3,721			4,822			7,340
Other changes in plan assets and benefit obligations recognized in other comprehensive income:
Actuarial loss		4,749			8,610			941
Prior service cost		—			580			414
Amortization of prior service cost		—			(580	)		(190	)
Amortization of actuarial loss		(3,402	)		(2,827	)		(3,485	)
Amortization of transition obligation		(4	)		(5	)		(6	)
Change in control		—			—			2,613
Curtailment gain		—			—			(7,164	)
Recognition of prior service cost upon curtailment		—			—			(1,746	)

Total recognized in other comprehensive income		1,343			5,778			(8,623	)

Total recognized in net periodic benefit cost and other comprehensive income	$	5,064		$	10,600		$	(1,283	)

A summary of the components of net periodic benefit cost for the postretirement benefit plan is as follows:

	2015			2014			2013
	2016			2015			2014
Components of net periodic benefit cost:
Service cost	$	~~368~~335		$	~~431~~368		$	~~684~~431
Interest cost		2,~~545~~028			2,~~397~~545			2,~~841~~397
Expected return on plan assets		(2,~~882~~687	)		(32,~~067~~882	)		(3,~~430~~067	)
Amortization of prior service credit		(~~1,304~~699	)		(1,~~303~~304	)		(21,~~075~~303	)
Amortization of actuarial gain		(1,~~435~~702	)		(1,~~043~~435	)		(~~452~~1,043	)
Net periodic benefit cost		(2,~~708~~725	)		(2,~~585~~708	)		(2,~~432~~585	)
Other changes in plan assets and benefit obligations recognized in other comprehensive income:
Actuarial gain		(32,~~818~~777	)		(13,~~659~~818	)		(131,~~768~~659	)
Amortization of actuarial gain		1,~~435~~702			1,~~043~~435			~~452~~1,043
Amortization of prior service credit		~~1,304~~699			1,~~303~~304			21,~~075~~303
Total recognized in other comprehensive income		(~~1,079~~376	)		~~687~~(1,079	)		~~(11,241~~687	)
Total recognized in net periodic benefit cost and other comprehensive income	$	(3,~~787~~101	)	$	(13,~~898~~787	)	$	(131,~~673~~898	)

At February 28, 2015 and 2014, the assets of the plans are held in trust and allocated as follows:

	Defined BenefitPension Plans						Postretirement Benefits Plan
	2015			2014			2015			2014			Target Allocation
Equity securities:
U.S.		50	%		52	%		27	%		27	%	15% - 30%
International		34	%		40	%		N/A			N/A		N/A
Debt securities:
U.S.		49	%		47	%		71	%		71	%	65% - 85%
International		65	%		59	%		N/A			N/A		N/A
Cash and cash equivalents:
U.S.		1	%		1	%		2	%		2	%	0% - 15%
International		1	%		1	%		N/A			N/A		N/A

As of February 28, 2015, the investment policy for the U.S. pension plans targets an approximately even distribution between equity securities and debt securities with a minimal level of cash maintained in order to meet obligations as they come due. The investment policy for the international pension plans targets an approximately 30/65/5 distribution between equity securities, debt securities and cash and cash equivalents.

The investment policy for the postretirement benefit plan targets a distribution among equity securities, debt securities and cash and cash equivalents as noted above. All investments are actively managed. This policy is subject to review and change.

At February 29, 2016 and February 28, 2015, the assets of the plans are held in trust and allocated as follows:


	Defined Benefit Pension Plans						Postretirement Benefits Plan
	2016			2015			2016			2015			Target Allocation
Equity securities:
U.S.		48	%		50	%		26	%		27	%		15% - 30	%
International		36	%		34	%		N/A			N/A			N/A
Debt securities:
U.S.		51	%		49	%		70	%		71	%		65% - 85	%
International		64	%		65	%		N/A			N/A			N/A
Cash and cash equivalents:
U.S.		1	%		1	%		4	%		2	%		0% - 15	%
International		—			1	%		N/A			N/A			N/A

As of February 29, 2016, the investment policy for the U.S. pension plans targets an approximately even distribution between equity securities and debt securities with a minimal level of cash maintained in order to meet obligations as they come due. The investment policy for the international pension plans targets an approximately 30/65/5 distribution between equity securities, debt securities and cash and cash equivalents, respectively.

The following table summarizes the fair value of the defined benefit pension plan assets at February 29, 2016:


	Fair value at February 29, 2016		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)
U.S. plans:
Short-term investments	$	707	$	—	$	707
Equity securities (collective funds)		38,595		—		38,595
Fixed-income funds		40,542		—		40,542
International plans:
Short-term investments		55		—		55
Equity securities (collective funds)		6,931		—		6,931
Fixed-income funds		12,389		—		12,389

Total	$	99,219	$	—	$	99,219

The following table summarizes the fair value of the defined benefit pension plan assets at February 28, 2015:


	Fair value at February 28, 2015		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)
U.S. plans:
Short-term investments	$	709	$	—	$	709
Equity securities (collective funds)		42,473		—		42,473
Fixed-income funds		41,870		—		41,870
International plans:
Short-term investments		157		—		157
Equity securities (collective funds)		8,012		—		8,012
Fixed-income funds		15,072		—		15,072

Total	$	108,293	$	—	$	108,293

The following table summarizes the fair value of the defined benefit pension plan assets at February 28, 2014:

	Fair value atFebruary 28, 2014		Quoted prices inactive markets foridentical assets(Level 1)		Significant otherobservable inputs(Level 2)
U.S. plans:
Short-term investments	$	719	$	—	$	719
Equity securities (collective funds)		42,599		—		42,599
Fixed-income funds		38,154		—		38,154
International plans:
Short-term investments		259		—		259
Equity securities (collective funds)		9,470		—		9,470
Fixed-income funds		13,693		—		13,693
Total	$	104,894	$	—	$	104,894

The following table summarizes the fair value of the postretirement benefit plan assets at February 28, 2015:

	Fair value atFebruary 28, 2015		Quoted prices inactive markets foridentical assets(Level 1)		Significant otherobservable inputs(Level 2)
Short-term investments	$	1,192	$	—	$	1,192
Equity securities		12,133		12,133		—
Fixed income securities		32,275		—		32,275
Total	$	45,600	$	12,133	$	33,467

The following table summarizes the fair value of the postretirement benefit plan assets at February 2829, ~~2014~~2016:

Fair value atFebruary 28, 2014

Quoted prices inactive markets foridentical assets(Level 1)

Significant otherobservable inputs(Level 2)

Fair value atFebruary 29, 2016

Quoted prices inactive markets foridentical assets(Level 1)

Significant otherobservable inputs(Level 2)

Short-term investments

1,~~312~~706

—219

1,~~312~~487

Equity securities

1210,~~968~~324

—

Fixed income securities

3428,~~477~~180

—

3428,~~477~~180

Total

4840,~~757~~210

1210,~~968~~543

3529,~~789~~667

~~Short-term~~The ~~investments:~~following ~~Short-term~~table ~~investments,~~summarizes ~~which~~the ~~are~~fair ~~primarily~~value ~~money~~of ~~market~~the ~~funds,~~postretirement ~~are~~benefit ~~valued based~~plan onassets ~~exit~~at ~~prices or net asset values. These investments are generally classified as Level~~February 228, ~~since~~2015: ~~the valuations use observable inputs.~~

Equity securities: The fair value of collective funds is valued at the closing net asset value or at the executed exchange trade prices. Pricing for these securities is typically provided by a recognized pricing service. Generally, these collective fund investments are classified as Level 2 because the valuations are based on observable inputs. Common stock and exchange traded mutual funds are valued at the closing price reported on the active market on which such securities are traded and are therefore classified as Level 1.


	Fair value at February 28, 2015		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)
Short-term investments	$	1,192	$	—	$	1,192
Equity securities		12,133		12,133		—
Fixed income securities		32,275		—		32,275

Total	$	45,600	$	12,133	$	33,467

Short-term investments: Short-term investments primarily include money market funds and cash. Investments in money market funds, are valued based on exit prices or net asset values. These investments are generally classified as Level 2 since the valuations use observable inputs.

Equity securities: The fair value of collective funds is valued at the closing net asset value or at the executed exchange trade prices. Pricing for these securities is typically provided by a recognized pricing service. Generally, these collective fund investments are classified as Level 2 because the valuations are based on observable inputs. Investments in exchange traded mutual funds are valued at the closing price reported on the active market on which such funds are traded and are therefore classified as Level 1.

Fixed-income funds and securities: Investments in fixed-income funds and fixed income securities primarily consist of U.S. and foreign-issued corporate notes and bonds, convertible bonds, asset-backed securities, government agency obligations, government obligations, municipal bonds and interest-bearing commercial paper. The fair value of these investments is valued using evaluated prices provided by a recognized pricing service. Because the evaluated prices are based on observable inputs, such as dealer quotes, available trade information, spread, bids and offers, prepayment speeds, U.S. Treasury curves and interest rate movements, investments in this category are classified as Level 2.

The Corporation expects to contribute approximately $54,~~300~~900 in ~~2016~~2017 to the Gibson Retirement Plan, which represents the legally required minimum contribution level. Any discretionary additional contributions the Corporation may make are not expected to exceed the deductible limits established by Internal Revenue Service (“IRS”) regulations.

Based on historic patterns and currently scheduled benefit payments, the Corporation expects to contribute approximately $2,~~530~~550 to the Supplemental Executive Retirement Plan in ~~2016~~2017, which represents the total expected benefit ~~payment~~payments for that period. The plan is a nonqualified and unfunded plan, and annual contributions, which are equal to benefit payments, are made ~~from~~ from the Corporation’s general funds.

The benefits expected to be paid out are as follows:

			Postretirement Benefits Plan
	Defined BenefitPension Plans		Excluding Effect ofMedicare Part D Subsidy		Including Effect ofMedicare Part D Subsidy
2016	$	11,322	$	3,997	$	3,424
2017		11,246		3,962		3,446
2018		11,400		3,942		3,375
2019		11,443		3,948		3,336
2020		11,367		3,936		3,271
2021 – 2025		56,976		19,253		18,426

The benefits expected to be paid out are as follows:


			Postretirement Benefits Plan
	Defined Benefit Pension Plans		Excluding Effect of Medicare Part D Subsidy		Including Effect of Medicare Part D Subsidy
2017	$	11,246	$	3,623	$	3,187
2018		11,381		3,649		3,169
2019		11,421		3,679		3,157
2020		11,362		3,701		3,132
2021		11,432		3,688		3,544
2022 – 2026		57,003		18,458		17,768

NOTE 13 – LONG-TERM LEASES AND COMMITMENTS

The Corporation is committed under noncancelable operating leases for commercial properties (certain of which have been subleased) and equipment. Rental expense under operating leases for the years ended ~~2015~~2016, ~~2014~~2015 and ~~2013~~2014 is as follows:

	2015			2014			2013
	2016			2015			2014
Gross rentals	$	8476,~~612~~194		$	8384,~~790~~612		$	6683,~~840~~790
Sublease rentals		(21,~~945~~742	)		(52,~~152~~945	)		(75,~~758~~152	)
Net rental expense	$	8174,~~667~~452		$	7881,~~638~~667		$	5978,~~082~~638

At February 2829, ~~2015~~2016, future minimum rental payments for noncancelable operating leases, net of aggregate future minimum noncancelable sublease rentals, are as follows:

Gross rentals:
2016	$	65,247
2017	$	62,824
2017		68,840
2018		61,053
2018		62,449
2019		53,355
2019		50,933
2020		47,594
2020		44,284
2021		42,135
Later years		~~201~~174,~~788~~294
		493,541
		441,255
Sublease rentals		(64,~~379~~839	)
Net rentals	$	~~487~~436,~~162~~416

The table above includes approximately $~~326~~264,000 of estimated future minimum rental payments related to the Clinton Cards business. Also included in the table above is approximately $~~142~~159,000 of estimated future minimum rental payments related to the new world headquarters building. See Note 18 - “World headquarters relocation” for further information.

NOTE 14 – FAIR VALUE MEASUREMENTS

Assets and liabilities measured at fair value are classified using the fair value hierarchy based upon the transparency of inputs as of the measurement date. The classification of fair value measurements within the hierarchy is based upon the lowest level of input that is significant to the measurement. The three levels are defined as follows:

•

Level 1 – Valuation is based upon quoted prices (unadjusted) in active markets for identical assets or liabilities.

•

Level 2 – Valuation is based upon quoted prices for similar assets and liabilities in active markets, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

•

Level 3 – Valuation is based upon unobservable inputs that are significant to the fair value measurement.

The following table summarizes the assets and liabilities measured at fair value as of February 28, 2015:

	February 28, 2015		Level 1		Level 2		Level 3
Assets measured on a recurring basis:
Deferred compensation plan assets	$	12,745	$	10,997	$	1,748	$	—
Liabilities measured on a recurring basis:
Deferred compensation plan liabilities	$	13,412	$	10,997	$	2,415	$	—

The following table summarizes the assets and liabilities measured at fair value as of February 28, 2014:

	February 28, 2014		Level 1		Level 2		Level 3
Assets measured on a recurring basis:
Deferred compensation plan assets	$	12,285	$	10,289	$	1,996	$	—
Liabilities measured on a recurring basis:
Deferred compensation plan liabilities	$	13,230	$	10,289	$	2,941	$	—

The ~~deferred~~following ~~compensation~~table ~~plan~~summarizes ~~includes~~the ~~investments~~assets ~~in mutual funds~~ and aliabilities ~~money~~measured ~~market fund. Assets held in mutual funds are recorded~~ at fair value, ~~which is considered a Level 1 valuation~~ as ~~it is based on each fund’s quoted market value per share in an active market. The money market fund is classified as Level 2 as substantially all~~ of ~~the fund’s investments are determined using amortized cost. The fair value of the deferred compensation plan liabilities is based on the fair value of: (i)~~February the plan’s assets for invested deferrals and (ii) hypothetical investments for unfunded deferrals resulting from the conversion of memorandum restricted stock units to future cash-settled obligations pursuant to the Merger. Prior to the Merger29, ~~the assets and related obligation associated with deferred memorandum~~2016: ~~restricted stock units were carried at cost in equity and offset each other.~~


	February 29, 2016		Level 1		Level 2		Level 3
Assets measured on a recurring basis:
Deferred compensation plan assets	$	11,158	$	9,936	$	1,222	$	—
Investment in equity securities		33,230		33,230		—		—

	$	44,388	$	43,166	$	1,222	$	—

Liabilities measured on a recurring basis:
Deferred compensation plan liabilities	$	12,064	$	9,936	$	2,128	$	—

The following table summarizes the assets and liabilities measured at fair value as of February 28, 2015:


	February 28, 2015		Level 1		Level 2		Level 3
Assets measured on a recurring basis:
Deferred compensation plan assets	$	12,745	$	10,997	$	1,748	$	—

Liabilities measured on a recurring basis:
Deferred compensation plan liabilities	$	13,412	$	10,997	$	2,415	$	—

The deferred compensation plan includes investments in mutual funds and a money market fund. Assets held in mutual funds are recorded at fair value, which is considered a Level 1 valuation as it is based on each fund’s quoted market value per share in an active market. The money market fund is classified as Level 2 as substantially all of the fund’s investments are determined using amortized cost. The fair value of the deferred compensation plan liabilities is based on the fair value of: (i) the plan’s assets for invested deferrals and (ii) hypothetical investments for unfunded deferrals.

The investment in equity securities is considered a Level 1 valuation as it is based on a quoted price in an active market.

NOTE 15 – COMMON SHARES AND STOCK-BASED COMPENSATION

At February 2829, ~~2015~~2016 and ~~2014~~February 28, 2015 the Corporation had 100 shares of common stock authorized and outstanding. In conjunction with the Merger and pursuant to the Corporation’s amended and restated articles of incorporation all previously authorized Class A and Class B shares were canceled and replaced by the new class of common stock.

Prior to the Merger, the Corporation maintained various stock-based compensation plans for the benefit of its directors, officers and other key employees. These plans provided for the granting of stock options, performance shares and restricted stock units. In conjunction with the Merger, all stock-based compensation awards were cash-settled, canceled or modified to cash-based liability awards. As a result, no stock-based compensation expense has been recognized subsequent to the ~~second quarter of 2014~~Merger. The expense attributable to the modified cash-based liability awards for post-Merger vesting service is included with other cash-based incentive compensation.

For the year ended February 28, 2014, stock-based compensation expense, recognized in “Administrative and general expenses” on the Consolidated Statement of Income, was $13,812. Of this amount, $4,125 represented the expense attributed to equity-based awards prior to the Merger and $3,966 was the Merger-related incremental stock-based compensation expense associated with the cancellation of the outstanding performance shares and restricted stock units held by the Family Shareholders, as described in Note 2. The combined expense of $8,091 is offset against shareholder’s equity and is classified as “Stock-based compensation” ~~Options~~on the Consolidated Statement of Cash Flows for the year then ended. The remaining stock-based compensation expense of $5,721 in 2014 represented the cumulative effect on compensation cost recognized prior to the Merger Date that was attributable to the fair value of the modified cash-based liability awards.

~~Under the~~The Corporation’s ~~prior~~received ~~stock~~cash ~~option~~proceeds ~~plans,~~of ~~when options to purchase common shares were granted to directors~~$1,718 ~~officers~~from orthe ~~other~~exercise ~~key~~of stock ~~employees,~~options ~~they~~during ~~were granted at~~ the ~~then-current~~year ~~market~~ended ~~price. In general~~February 28, ~~subject~~2014. toThe ~~continuing~~total ~~service, options~~intrinsic ~~became~~value ~~exercisable commencing twelve months after the date of grant in annual installments~~ and ~~expired~~tax ~~over~~benefits arealized ~~period of not more than ten years~~ from the ~~date~~exercise of ~~grant.~~stock-based ~~The~~payment ~~Corporation~~awards ~~generally~~in ~~issued~~2014 ~~new shares when options to purchase Class A common shares~~ were ~~exercised~~$6,298 and ~~treasury~~$2,486, ~~shares when options to purchase Class B common shares were exercised~~respectively.

Pursuant to the Merger Agreement, all outstanding stock options held by directors and employees, excluding the Family Shareholders, were settled in 2014 through cash payments totaling $7,159. Included in this amount was $3,933 for “in the money” stock options that were settled at fair value as of the Merger Date and were therefore recognized as a reduction of Capital in Excess of Par Value on the Consolidated Statement of Shareholder’s Equity. The remaining $3,226 was paid to settle stock options that had an exercise price in excess of fair value as of the Merger Date and was recognized as additional compensation expense in 2014.

The outstanding stock options held by the Family Shareholder employees at the Merger date were canceled without a replacement award or the payment of any consideration. Because these options were fully vested, no additional compensation expense was recognized upon cancellation. See Note 2 for further information.

Performance Shares

Prior to the Merger, performance shares represented the right to receive common shares, at no cost to the employee, upon the achievement of management objectives over a predefined performance period and the satisfaction of service-based vesting requirements. In 2013, the Corporation introduced a performance share program that was designed to reward the Corporation’s officers and certain management employees for the attainment of performance objectives over a three-year measurement period. The shares granted in 2013 were equally divided into three tranches, each containing specified performance goals over three separate, but sequentially cumulative performance periods extending from March 1, 2012 to February 28, 2015.

Achievement of performance criteria may range from 0% to 200% of the initial number of shares awarded in each tranche. All shares credited to participants under this program upon the achievement of specified performance goals will, subject to service-based vesting requirements, vest on February 28, 2015. The expense recognized each period is dependent upon an estimate of the number of shares that will ultimately vest. Compensation expense is recognized on a straight line basis over the vesting period, beginning on the date the awards were made.

In connection with the Merger, all performance shares granted to employees, excluding the Family Shareholders, were converted from share-based equity awards to cash-based liability awards. Under this award modification, each outstanding performance share will be settled at $19.00 upon satisfaction of performance and vesting conditions. An expense of $1,545, representing the cumulative effect on previously recognized compensation cost attributable to the difference between the $19.00 per unit cash settlement value and the award’s grant date fair value, was recorded following the completion of the Merger in 2014.

The outstanding performance shares held by the Family Shareholders at the Merger date were canceled without a replacement award or the payment of any consideration. Accordingly, the previously unrecognized compensation cost of $2,603 attributable to these awards was recognized as incremental stock-based compensation expense upon cancellation.

Restricted Stock Units

Prior to the Merger, the Corporation awarded restricted stock units to directors, officers and other key employees. The restricted stock units represented the right to receive Class A common shares or Class B common shares, at no cost to the holder, upon the satisfaction of a two or three-year continuous service-based vesting period. The awards have a graded-vesting feature with compensation expense being recognized over the requisite service period for each separately vesting tranche. The expense recognized each period is dependent upon an estimate of the number of stock units that will ultimately vest.

In connection with the Merger, all restricted stock units held by employees, excluding the Family Shareholders, were converted from share-based equity awards to cash-based liability awards, whereupon each restricted stock unit entitles the holder to receive $19.00 upon satisfaction of the award’s vesting conditions. Except for the cash settlement feature, the modified awards retained the same terms and conditions, including service-based vesting, of the original equity-based awards. An expense of $464 representing the cumulative effect on previously recognized compensation cost attributable to the difference between the $19.00 per unit cash settlement value and each award’s grant date fair value was recorded following the completion of the Merger in 2014.

The Merger Agreement also provided that each outstanding restricted stock unit held by members of the board of directors, other than the Family Shareholders, became fully vested and was settled for a cash payment equal to $19.00. The accelerated vesting of these awards resulted in the recognition of incremental compensation expense of $512 in 2014.

The outstanding restricted stock units held by the Family Shareholders were canceled at the closing of the Merger without a replacement award or the payment of any consideration. Accordingly, the previously unrecognized compensation cost of $1,363 attributable to these awards was recognized as incremental stock-based compensation expense upon cancellation.

For the years ended February 28, 2014 and 2013, stock-based compensation expense, recognized in “Administrative and general expenses” on the Consolidated Statement of Income, was $13,812 and $10,743, respectively. Stock-based compensation expense for 2014 included the expense attribution of equity-based awards prior to the Merger of $4,125 and the incremental stock-based compensation expense, caused as a direct result of the Merger, associated with the cancellation of the outstanding performance shares and restricted stock units held by the Family Shareholders of $3,966. The combined amount of $8,091 is included as stock-based compensation on the Consolidated Statement of Cash Flows. Stock-based compensation expense for 2014 also included the cumulative effect through the Merger Date on previously recognized compensation cost attributable to the modified awards’ $19.00 per unit cash settlement value of $5,721.

The table below summarizes the incremental compensation expense, caused as a direct result of the Merger, which includes both stock-based and non-stock-based compensation expense, and the adjustments to Capital in Excess of Par Value resulting from the settlement, modification and cancellation of the outstanding equity-based awards in 2014.

	CompensationExpense		Capital in Excessof Par Value
Settlement of stock options	$	3,226	$	(3,933	)
Modification and settlement of non-executive directors’ awards		512		(371	)
Net tax deficiency from settlement and cancellation of stock-based awards		—		(6,885	)
Conversion of performance share and restricted stock awards to cash-based liability awards		2,897		(6,498	)
Cancellation of the Family Shareholders’ performance share and restricted stock awards		3,966		3,966
	$	10,601	$	(13,721	)

For the years ended February 28, 2014 and 2013, cash received from stock options exercised was $1,718 and $1,259, respectively. The total intrinsic value from the exercise of stock-based payment awards was $6,298 and $7,423 in 2014 and 2013, respectively. The actual tax benefit realized from the exercise of stock-based payment awards totaled $2,486 and $2,929 for 2014 and 2013, respectively.

NOTE 16 – CONTINGENCY

The Corporation is presently involved in various judicial, administrative, ~~regulatory~~ and ~~arbitration~~regulatory proceedings concerning matters arising in the ordinary course of business, including but not limited to, employment, and commercial disputes and ~~other~~purported ~~contractual~~class ~~matters~~action litigation. These matters are inherently subject to many uncertainties regarding the possibility of a loss to the Corporation. ~~These~~ These uncertainties will ultimately be resolved when one or more future events occur or fail to occur, confirming the incurrence of a liability or reduction of a liability. In accordance with ASC Topic 450, “Contingencies,” the Corporation accrues for these contingencies by a charge to income when it is both probable that one or more future events will occur confirming the fact of a loss and the amount of the loss can be reasonably estimated. This accrual is included in “Accrued liabilities” on the Consolidated Statement of Financial Position. Due to this uncertainty, the actual amount of any loss may ultimately prove to be larger or smaller than the amounts reflected in the Corporation’s Consolidated Financial Statements. Some of these proceedings are at preliminary stages and some of these cases seek an indeterminate amount of damages.

Al Smith et al. v. American Greetings Corporation. On June 4, 2014, Al Smith and Jeffrey Hourcade, former fixture installation crew members for special projects, individually and on behalf of those similarly situated, filed a putative class action lawsuit against American Greetings Corporation in the U.S. District Court for the Northern District of California, San Francisco Division. Plaintiffs claim that the Corporation violated certain rules unde

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