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American Greetings Corp. (AM)

F1Q11 (Qtr End 05/28/2010) Earnings Call

June 30, 2010 9:00 AM ET

Executives

Greg Steinberg – Treasurer and Director, Investor Relations

Zev Weiss – Chief Executive Officer

Steve Smith – Chief Financial Officer

Analysts

Jeff Stein – Soleil Securities

Mimi Noel – Sidoti & Company

Keith Curtis – Brant Point Capital

Presentation

Operator

Please standby. We’re about to begin. Good day, everyone. And welcome to the American Greetings Corporation First Quarter Fiscal 2011 Earnings Conference Call. Today’s conference is being recorded.

At this time, I would like to turn the conference over to Mr. Gregory Steinberg. Please go ahead, sir.

Greg Steinberg

Thank you, Alicia. Good morning, everyone and welcome to our First Quarter Conference Call. I am Greg Steinberg, the company’s Treasurer and Director of Investor Relations. Joining me today on the call are Zev Weiss, our CEO and Steve Smith, our CFO.

We released earnings for the first quarter of fiscal 2011 this morning. If you do not yet have our first quarter press release, you can find the copy within the Investor section of the American Greetings website at investors.americangreetings.com.

As you may expect, some of our comments today include statements about projections for the future. Those projections involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. We cannot guarantee the accuracy of any forecast or estimates, and we do not plan to update any forward-looking statements.

If you’d like more information on our risks involved in forward-looking statements, please see our annual report or our SEC filings. Previous earnings releases, as well as our 10-Qs, 10-Ks and annual report are available on the Investor section of the American Greetings website.

We will now proceed with comments from both our CEO and CFO, followed by a question-and-answer session. Zev?

Zev Weiss

Thank you, Greg, and good morning, everyone. Today I’ll cover three main topics. First, I will share few thoughts on product leadership strategy. Second, I will comment on the status of the integration of both Recycled Paper Greetings and Papyrus into American Greetings. And finally, I will speak to our outlook for fiscal year 2011. Steve will then present more details behind our first quarter financial results.

I’m pleased that our first quarter earnings per share of $0.75 were the highest we ever achieved in the first quarter. Our first quarter EPS benefited from solid performance in our core business units, the changes we made over the last 18 months to our portfolio businesses and the shares we repurchased over the past several years. We have made investments into our core greeting card business in an effort to distinguish ourselves in the marketplace and deliver great products to our customers.

Over the past few quarters we have talked about a key component of this initiative, product innovation. The objective to continuously create distinct product is part of our product leadership strategy. Our product leadership goal is to create the best greeting card product in the industry. Achieving product leadership will attract more consumers to our product and help our retail partners grow their retail productivity.

More specifically product leadership requires that we not only have the best product but that we also offer differentiated merchandising. In order to ensure we have the best product we continuously surveyed consumers, studied large quantities of sales data and test products to ensure we create greeting cards that offer a high degree of satisfaction to our consumers.

Let me share with you a few examples of some of our recent products that appear to be enhancing the consumer experience. For younger more contemporary card buyers, we recently launched just-between-us a card buying that delivers heartfelt sentiments along with fresh photography.

This past Christmas we piloted a greeting card with an LCD screen, which included a digital slideshow. Since that time we have developed and introduced new LCD greeting cards. These new cards feature high quality LCD displays with digital content that feature comic relief, along with celebratory wishes through audio and playful multi-image sideshows.

Another greeting card we recently developed, bring music into the card in a whole new way. This greeting card delivers the appropriate sentiment for the desired occasion and it also features an iTunes gift code redeemable for one song download of the recipient’s choice. We are very proud of our distinct products and we will continue to work hard to surprise and engage the consumers when shopping the greeting card aisle.

It was about 18 months ago that we meaningfully changed the profile of the corporation by altering the mix of businesses through one divestiture and two acquisitions. At that time, we sold our retail store operations and we acquired Papyrus and Recycled Paper Greetings. The net effect of these three transactions was to enhance our focus on our core greeting card business. We acquired these best-in-class product lines as part of our strategy to satisfy the full range of consumer needs in our category.

Shortly after the transactions were announced, we stated that our goal with Recycled Paper Greetings and Papyrus was to protect what makes these products unique, particularly the creative models, but also to leverage our economies of scale to benefit the consolidated group overtime.

Over the past 18 months, we have been working to integrate these new businesses where appropriate. I’m pleased to say we have made significant progress on the integrations. First after much analysis and discussion we decided to combine Recycled Paper Greetings and Papyrus under one new company, Papyrus-Recycled Greetings or PRG. This structure allows us to keep important components of the new business separate while still allowing them to benefit from the scale of the larger group.

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