UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended February 28, 201329, 2016

OR

For the transition period from                      to                     

Commission File No. 1-13859

American Greetings Corporation

(Exact name of registrant as specified in its charter)

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:

Class B Common Shares, Par Value $1.00None.

(Title of Class)

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  x¨

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  x¨    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, August 24, 2012 — $417,165,999.68(affiliates,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 this purpose, have been deemed to be directors, executive officers and certain significant shareholders).

Numberthe capital stock of shares outstanding asthe registrant. As of May 1, 2013:26, 2016 and August 28, 2015, 100 shares of the registrant’s common stock, par value $0.01 per share, were outstanding.

CLASS A COMMON — 29,017,268

CLASS B COMMON — 2,883,680

DOCUMENTS INCORPORATED BY REFERENCE

None.

AMERICAN GREETINGS CORPORATION

INDEX

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 operates predominantly in a single industry: the design, manufacture and sale of everyday and seasonal greeting cards and otherdesigns, manufactures and/or distributes social 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 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, manufacture custom display fixtures for our products and productsas of others. As a result of the bankruptcy administration of a former customer, Clinton Cards PLC (“Clinton Cards”), and the related acquisition of certain of its assets in June 2012, we also operate approximately 400February 29, 2016, operated 397 card and gift retail stores throughout the United Kingdom. For information regarding this acquisition that resultedIn 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 additionproducts of a new Retail Operations segment during fiscal 2013, see the discussion included in Part II, Item 7 and in Note 2 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report.

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, 20132016 refers to the fiscal year ended February 28, 2013.29, 2016. The Corporation’s Retail Operations segment is consolidated on a one-month lag corresponding with its fiscal year endyear-end of February 2, 2013.January 30, 2016.

Merger Agreement2013 Going Private Transaction

On September 26, 2012, weAmerican Greetings announced that ourits 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 the CorporationAmerican Greetings not currently owned by them (the “Going Private Proposal”).

On In connection with the Going Private Proposal, on March 29, 2013, weAmerican Greetings signed an agreement and plan of merger (the(as amended on July 3, 2013, the “Merger Agreement”) by and, among American Greetingsthe Corporation, Century Intermediate Holding Company, a Delaware corporation (“Parent”CIHC”), which upon the closing of the Merger (as defined below) will be indirectly owned by the Family Shareholders, and Century Merger Company, a wholly-owned subsidiary of Parentan 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 more fully describeda result of the Merger, American Greetings became wholly-owned by CIHC, which in our Current Report on Form 8-K filed withturn is indirectly wholly-owned by Morry Weiss, the SecuritiesChairman of the Board, Zev Weiss, a director and Exchange Commission (“SEC”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”) on April 1, 2013, at. At the effective time of the Merger, each issued and outstanding share of the Corporation (other than shares owned by the Corporation, ParentAmerican Greetings, CIHC (which will include at the effective time of the Merger included all shares currentlypreviously held by the Family Shareholders), or Merger Sub or holders who have properly exercised dissenters’ rights under Ohio law) will beSub) was converted into the right to receive $18.20$19.00 per share in cash,cash. All other shares of American Greetings were cancelled without interest and subject to any withholding taxes, and Merger Sub will merge with and into the Corporation,consideration.

In connection with the Corporation surviving the Merger as a wholly-owned subsidiary of Parent (the “Merger”). The consummationfinancing of the Merger, is subjectCIHC issued $245 million in aggregate stated value of non-voting preferred stock to customary conditions, and is further conditionedAG Investment, LLC, which was redeemed on the favorable vote of (1) at least two-thirdsFebruary 10, 2014 with part of the outstanding voting powernet proceeds of the Corporation represented$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 Class A common shares and Class B common shares, voting together as a single class, and (2) a majorityclosing date of the Class A common shares and Class B common shares held by persons other than the Family Shareholders, the Irving I. Stone Foundation and our executive officers and directors, as more fully described in our Current Report on Form 8-K filed with the SEC on April 1, 2013 and in the preliminary proxy statement on Schedule 14A filed with the SEC on April 17, 2013 (the “MajorityMerger. Further details of the Minority Shareholder Approval” condition). For purposes of the Majority of the Minority Shareholder Approval only, Class B common shares will be entitled to one vote per share. Under the Merger Agreement, “Family Shareholders” includes: Zev Weiss, a director and the Corporation’s Chief Executive Officer; Morry Weiss, the Corporation’s Chairman of the Board of Directors; Jeffrey Weiss, a director and the Corporation’s President and Chief Operating Officer; and certain other members of the Weiss family, together with the Irving I. Stone Limited Liability Company. See “Risk Factors Relatedare provided in Note 2 to the Merger” for a discussionConsolidated Financial Statements included in Part II, Item 8 of certain considerations pertaining to the proposed Merger.this Annual Report.

Products

American Greetings creates,designs, manufactures and/or distributes social expression products including greeting cards, gift packaging, party goods, giftware and stationery as well as custom display fixtures.stationery. Our major domestic greeting card brands areinclude American

Greetings, Recycled Paper Greetings, Papyrus, Carlton Cards, Gibson, Tender Thoughts, and Just For You. Our other domestic products include

AGI In-Store display fixtures,You, Today and Always, justwink, Inventions and P.S. Hello, as well as other paper product offerings such as DesignwareDesignWare 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 areinclude AmericanGreetings.com, BlueMountain.com, Egreetings.comjustwink.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 “Strawberry Shortcake” characters.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 classificationscategory is included in Part II, Item 7 of this Annual Report.

Business Segments

At February 28, 2013,29, 2016, we operated in five business segments:North American Social Expression Products, International Social Expression Products, Retail Operations, AG Interactive and non-reportable operating segments.Non-reportable segment. For information regarding the various business segments comprising our business, see the discussion included in Part II, Item 7 and in Note 1719 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 42% of total revenue in 2016 and approximately 40% of total revenue in 2015 and 39% of total revenue in 2013 and 42% of total revenue in 2012 and 2011.2014. Net sales to Wal-Mart Stores, Inc. and its subsidiaries accounted for approximately 14%, 14% and 15% of total revenue in 2013, 20122016, and 2011, respectively.approximately 14% in each of 2015 and 2014. Net sales to Target Corporation accounted for approximately 14% of total revenue in 2016, and approximately 13% of total revenue in 2013each of 2015 and 14% of total revenue in 2012 and 2011.2014. No other customer accounted for 10% or more of our consolidated total revenue.revenue in 2016, 2015 or 2014. Approximately 55%, 55% and 54%58% of the North American Social Expression Products segment’s revenue in 2013, 2012each of 2016, 2015 and 2011, respectively,2014 was attributable to its top 5five customers. Approximately 48%59%, 48%54% and 44%50% of the International Social Expression Products segment’s revenue in 2013, 20122016, 2015 and 2011,2014, respectively, excluding sales to the Retail Operations segment, was attributable to its top 3three customers.

ConsumersCompetition

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, including the following:

We believe that over 80%the primary competitive factors in attracting and retaining customers are:

We believe that we are onecompete favorably with respect to many of only two main suppliers offering a full linethese factors, particularly product quality, design and breadth. Generally, we distinguish ourselves from such competitors principally on the basis of social expression products. Our principal competitor is Hallmark Cards, Inc. Based upon our general familiarity with the greeting cardproduct quality and gift packaging industries and limited information as to our competitors, we believe that we are one of the two largest greeting card companies in the industry and that we are the largest publicly traded greeting card company.design.

Production and Distribution

In 2013,2016, our channels of distribution continued to be primarily through mass merchandising,retail, which is comprised of three distinct channels: mass merchandisers (including discount retailers);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 approximately 400 card and gift retail stores that we operatedoperate 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 the 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 whichthat 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 and the United Kingdom.America. We also source products from domestic and foreign third party suppliers. Additionally,third-party suppliers, including suppliers in China and Mexico. Additional information by geographic area is included in Note 1719 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 relatedanniversary-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 within 10 to 15 days ofafter the product beingis sold by those customers at their retail locations. As of February 28, 2013,29, 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.Americansale. American Greetings and many of its competitors selloften 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.

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.property.

Employees

At February 28, 2013,29, 2016, we employed approximately 6,7007,000 full-time employees and approximately 18,70020,500 part-time employees which, when jointly considered, equate to approximately 16,10017,250 full-time equivalent employees. Approximately 825725 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.

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. Lossesrecoverability. Depending on the amount of the loss attributed to these specific eventsinstances, such losses could have historically not been material.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 partythird-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.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:

To resolve some of the remaining legal uncertainty, we expect new United Statesunauthorized acquisition of sensitive information. The requirements currently vary by jurisdiction and foreign laws and regulationsare subject to be adopted over time that will be directly or indirectly applicable to the Internet and to our activities. Any existing or new legislation 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 and regulations or the need to modify our business practices.

We are indirectly owned and an adverse ruling may prevent the proposed Merger from being completed or adversely affect the Corporation’s financial results and liquidity.

Following the Corporation’s announcement on September 26, 2012 that our Board had received the Going Private Proposal, the Corporation, our directors, certain members ofcontrolled by the Weiss family, and related parties have been named as defendants in several lawsuits brought by purported shareholderssome of the Corporation challenging the proposed Merger and seeking, among other things, injunctive relief to enjoin the defendants from completing the proposed Merger. An adverse judgment for monetary damages could have a material adverse effect on the financial results, operations and liquidity of the Corporation.

Failure to complete the proposed Merger could negatively affect our business, financial condition, results of operations or stock price.

The completion of the proposed Merger is subject to customary conditions, and there can be no assurance that these conditions will be satisfied or that the proposed Merger will otherwise occur. If the proposed Merger is not completed, we will be subject to several risks, including that:

Even if the proposed Merger does not occur, the Family Shareholders will continue to own a substantial portion of the voting power of our common shares.

Our authorized capital stock consists of Class A common shares and Class B common shares. The economic rights of each class of common shares are identical, but the voting rights differ. Class A common shares are entitled to one vote per share and Class B common shares are entitled to ten votes per share. There is no public trading market for the Class B common shares, which are held by members of the extended family of American Greetings’ founder,executive officers and directors of American Greetings and their extended

familyits subsidiaries, and who have the ability to control our policy and operations. The interests of the members family trusts and certain other persons. As of May 1, 2013, the Family Shareholders, together with the Irving I. Stone Foundation, beneficially owned, in the aggregate, approximately 90% of our outstanding Class B common shares (including restricted stock units that vest, and stock options that are exercisable, within 60 days of May 1, 2013), which, together with Class A common shares beneficially owned by them, represents approximately 51% of our total outstanding voting power. Accordingly, even if the proposed Merger does not occur, the Family Shareholders, together with the Irving I. Stone Foundation, would be able to continue to significantly influence the outcome of shareholder votes, including votes concerning the election of directors, the adoption or amendment of provisions in our Articles of Incorporation or Code of Regulations, and the approval of mergers and other significant corporate transactions, and their interestsWeiss family may not in all cases be aligned with your interests.

Our charter documents and Ohio law may inhibit a takeover and limit our growth opportunities, which could adversely affectinterests of the market priceholders of our common shares.

Certain provisions of Ohio law anddebt. For example, if we encounter financial difficulties or are unable to pay our charter documents, together or separately, could havedebts as they mature, the effect of discouraging, or making it more difficult for, a third party to acquire or attempt to acquire controlinterests of the Corporation and limitmembers of the price that certain investorsWeiss family might be willing to pay inconflict with the future for our common shares. For example, our charter documents establish a classified Board of Directors, serving staggered three-year terms, allow the removal of directors only for cause, and establish certain advance notice procedures for nomination of candidates for election as directors and for shareholder proposals to be considered at shareholders’ meetings. In addition, while shareholders have the right to cumulative voting in the election of directors, Class B common shares have ten votes per share, which limits the abilityinterests of holders of Class A common sharesour 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 elect a director by exercising cumulative voting rights.holders of our debt.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

As of February 28, 2013,29, 2016, we owned or leased approximately 8.87.6 million square feet of plant, warehouse and office space throughout the world, of which approximately 501,6001.4 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, 2013,29, 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, althoughas 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 Retail Operationsthen existing North American retail operations segment in April 2009, in addition to the following, we remain subject to certain of the Retail Operations store leases on a contingent basis through our subleasing of stores to Schurman, which operates these retail stores throughout North America. SeeFor further information, see Note 131 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report. In addition, as a result of the bankruptcy administration of a former customer, Clinton Cards, and the related acquisition of certain of its assets in June 2012, we operate approximately 400 card and gift retail stores throughout the United Kingdom, all of which operate in premises that we lease from third parties.

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

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

Baker/Collier Litigation. American Greetings CorporationInformation regarding legal proceedings is a defendantdescribed in two putative class action lawsuits involving corporate-owned life insurance policies (the “Insurance Policies”): one filed in the Northern District of Ohio on January 11, 2012 by Theresa Baker as the personal representative of the estate of Richard Charles Wolfe (the “Baker Litigation”); and the other filed in the Northern District of Oklahoma on October 1, 2010 by Keith Collier as the personal representative of the estate of Ruthie Collier (the “Collier Litigation”).

In the Baker Litigation, the plaintiff claims that American Greetings Corporation (1) misappropriated its employees’ names and identities to benefit itself; (2) breached its fiduciary duty by using its employees’ identities and personal information to benefit itself; (3) unjustly enriched itself through the receipt of corporate-owned life insurance policy benefits, interest and investment returns; and (4) improperly received insurance policy benefits for the insurable interest in Mr. Wolfe’s life. The plaintiff seeks damages in the amount of all pecuniary benefits associated with the subject Insurance Policies, including investment returns, interest and life insurance policy benefits that American Greetings Corporation received from the deaths of the former employees whose estates form the putative class.

In the Collier Litigation, the plaintiff claims that American Greetings Corporation did not have an insurable interest when it obtained the subject Insurance Policies and wrongfully received the benefits from those policies. The plaintiff seeks damages in the amount of policy benefits received by American Greetings Corporation from the subject Insurance Policies, as well as attorney’s fees, costs and interest. On April 2, 2012, the plaintiff filed its First Amended Complaint, adding misappropriation of employee information and breach of fiduciary duty claims as well as seeking punitive damages. On April 20, 2012, American Greetings Corporation moved to transfer the Collier LitigationNote 16 to the Northern DistrictConsolidated Financial Statements under Part II, Item 8 of Ohio, where the Baker Litigation is pending. On July 6, 2012, the court granted American Greetings Corporation’s Motion to Transfer and transferred the case to the Northern District of Ohio, where the Baker Litigation is pending.this Annual Report.

On January 24, 2013, the parties reached a settlement in principle in both cases that, if approved by the Court, will fully and finally resolve all of the claims of the Wolfe and Collier estates, as well as the classes they seek to represent. The settlement was a product of extensive negotiations and a private mediation. It anticipates that the Court will consolidate the two cases and certify a single class that consists of the heirs or estates of the estates and heirs of all former American Greetings Corporation employees (i) who are deceased; (ii) who were not officers or directors of American Greetings; (iii) who were insured under one of the following corporate-owned life insurance plans: Provident Life & Accident 61153, Provident Life & Accident 61159, Mutual Benefit Life Insurance Company 111, Connecticut General ENX219, and Hartford Life Insurance Company 361; and (iv) for whom American Greetings has received a death benefit on or before the date on which the Court enters the Order of Preliminary Approval. If finally approved by the Court, American Greetings Corporation will deposit $12.5 million into a settlement fund to be distributed in its entirety to those members of the class who present valid claims, their counsel, and a settlement administration vendor. On April 19, 2013, the parties filed a joint motion seeking the Court’s preliminary approval of the settlement and are awaiting the Court’s approval of the settlement. If and when the settlement is approved, notice will be provided to potential class members, a hearing will be held, and the Court will entertain final approval of the settlement.

Cookie Jar/MoonScoop Litigation. As previously disclosed, on May 6, 2009, American Greetings Corporation and its subsidiary, Those Characters From Cleveland, Inc. (“TCFC”), filed an action in the Cuyahoga County (Ohio) Court of Common Pleas against Cookie Jar Entertainment Inc. (“Cookie Jar”) and its affiliates, Cookie Jar Entertainment (USA) Inc. (formerly known as DIC Entertainment Corporation) (“DIC”) and Cookie Jar Entertainment Holdings (USA) Inc. (formerly known as DIC Entertainment Holdings, Inc.) relating to the July 20, 2008 Binding Letter Agreement between American Greetings Corporation and Cookie Jar (the “Cookie Jar Agreement”) for the sale of the Strawberry Shortcake and Care Bears properties (the “Properties”). On May 7, 2009, Cookie Jar removed the case to the United States District Court for the Northern District of Ohio. Simultaneously, Cookie Jar filed an action against American Greetings Corporation, TCFC, Mike Young Productions, LLC (“Mike Young Productions”) and MoonScoop SAS (“MoonScoop”) in the Supreme Court of the State of New York, County of New York. Mike Young Productions and MoonScoop were named as defendants in the action in connection with the binding term sheet between American Greetings Corporation and MoonScoop dated March 24, 2009 (the “MoonScoop Binding Agreement”), providing for the sale to MoonScoop of the Properties.

On May 7, 2010, the legal proceedings involving American Greetings Corporation, TCFC, Cookie Jar and DIC were settled, without a payment to any of the parties. As part of the settlement, on May 7, 2010, the Cookie Jar Agreement was amended to, among other things, terminate American Greetings Corporation’s obligation to sell to Cookie Jar, and Cookie Jar’s obligation to purchase, the Properties. As part of the settlement, Cookie Jar Entertainment (USA) Inc. will continue to represent the Strawberry Shortcake property on behalf of American Greetings Corporation and will become an international agent for the Care Bears property. On May 19, 2010, the Northern District of Ohio court granted the parties’ joint Motion to Dismiss all claims and counterclaims without prejudice.

On August 11, 2009, MoonScoop filed an action against American Greetings Corporation and TCFC in the United States District Court for the Northern District of Ohio, alleging breach of contract and promissory estoppel relating to the MoonScoop Binding Agreement. On MoonScoop’s request, the court agreed to consolidate this lawsuit with the first Ohio lawsuit (described above) for all pretrial purposes. The parties filed Motions for Summary Judgment on various claims. On April 27, 2010, the court granted American Greetings Corporation’s Motion for Summary Judgment on MoonScoop’s breach of contract and promissory estoppel claims, dismissing these claims with prejudice. On the same day, the court also ruled that American Greetings Corporation must indemnify MoonScoop against Cookie Jar’s claims in this lawsuit. On May 21, 2010, MoonScoop appealed the court’s summary judgment ruling to the United States Court of Appeals for the Sixth Circuit. On June 4, 2010, American Greetings Corporation and TCFC appealed to the United States Court of Appeals for the Sixth Circuit the court’s ruling that it must indemnify MoonScoop against the cross claims asserted against it. On July 16, 2012, the United States Sixth Circuit Court of Appeals issued a split decision, with the majority reversing the Northern District of Ohio court’s order that had granted American Greetings Corporation’s Motion for Summary Judgment on MoonScoop’s principal claims. The case has been remanded to the District Court for further proceedings. The Court of Appeals also affirmed the District Court’s finding on summary judgment in favor of MoonScoop on its indemnity claim, involving MoonScoop’s attorney fees for defending against Cookie Jar’s third-party claims (which have been dismissed). As a result, the Corporation has reimbursed MoonScoop for the $161,309 in attorney fees that it incurred. The District Court held a trial beginning November 13, 2012. The jury returned a unanimous verdict in favor of American Greetings Corporation and TCFC. On November 26, 2012, the District Court entered judgment in favor of American Greetings Corporation and against MoonScoop.

On December 20, 2012, MoonScoop filed a Notice of Appeal with the United States Court of Appeals for the Sixth Circuit appealing the final judgment of the District Court. On February 1, 2013, MoonScoop moved to voluntarily dismiss its appeal, without filing an appellate brief. The Sixth Circuit granted the voluntary dismissal on February 4, 2013. The appeal was terminated, and the final judgment in favor of American Greetings stands as entered by the District Court in November 2012.

Carter/Wolfe/LMPERS Litigation. On September 26, 2012, the Corporation announced that the Board of Directors had received the Going Private Proposal. On September 27, 2012, Dolores Carter, a purported shareholder, filed a putative shareholder derivative and class action lawsuit (the “Carter Action”) in the Court of Common Pleas in Cuyahoga County, Ohio (the “Cuyahoga County Court”), against American Greetings Corporation and all of the members of the Board of Directors (“Carter Defendants”). The Carter Action alleges, among other things, that the directors of the Corporation breached their fiduciary duties owed to shareholders in evaluating and pursuing the proposal. The Carter Action further alleges claims for aiding and abetting breaches of fiduciary duty. Among other things, the Carter Action seeks declaratory relief. Subsequently, six more lawsuits were filed in the Cuyahoga County Court purporting to advance substantially similar claims on behalf of American Greetings against the members of the Board of Directors and, in certain cases, additional direct claims against American Greetings. One lawsuit was voluntarily dismissed. The other lawsuits, which remain pending, were consolidated by Judge Richard J. McMonagle on December 6, 2012 (amended order dated December 18, 2012) as In re American Greetings Corp. Shareholder Litigation, Lead Case No. CV 12 792421. Lead Plaintiffs and Lead Plaintiffs’ Counsel also were appointed. Lead Plaintiffs’ Counsel has served written discovery on the Corporation and has communicated its intent to file a motion for a preliminary injunction to prevent the merger from moving forward.

On April 30, 2013, Lead Plaintiffs’ Counsel also filed a Consolidated Class Action Complaint. The Consolidated Complaint brings a single class claim against the defendants for breach of fiduciary duties and aiding and abetting. The plaintiffs allege that the preliminary proxy statement on Schedule 14A filed with the SEC on April 17, 2013 omits information necessary to permit the Corporation’s shareholders to determine if the Merger is in their best interest, that the controlling shareholders have abused their control of the Corporation, that the special committee appointed to oversee the transaction is not independent, and that the other members of the board are also not independent.

On November 6, 2012, R. David Wolfe, a purported shareholder, filed a putative class action (the “Wolfe Action”) in the United States District Court for the Northern District of Ohio (the “Federal Court”) against certain members of the Weiss Family and the Irving I. Stone Oversight Trust, the Irving Stone Limited Liability Company, the Irving I. Stone Support Foundation, and the Irving I. Stone Foundation (“Stone Entities”) alleging breach of fiduciary duties in proposing and pursuing the proposal, as well as against American Greetings, seeking, among other things, declaratory relief. Shortly thereafter, on November 9, 2012, the Louisiana Municipal Police Employees’ Retirement System also filed a purported class action in the Federal Court (the “LMPERS Action”) asserting substantially similar claims against the same defendants and seeking substantially similar relief.

On November 30, 2012, plaintiffs in the Wolfe and LMPERS Actions filed motions (1) to consolidate the Wolfe and LMPERS Actions, (2) for appointment as co-lead plaintiffs, (3) for appointment of co-lead counsel, and, in the Wolfe Action only, (4) for partial summary judgment. On December 14, 2012, the Corporation filed its oppositions to the motions (a) to consolidate the Wolfe and LMPERS Actions, (b) for appointment as co-lead plaintiffs, and (c) for appointment of co-lead counsel. On the same day, the Corporation also moved to dismiss both the Wolfe and LMPERS Actions. The Corporation answered both complaints on January 8, 2013, and on January 11, 2013, it filed its opposition to the motion for partial summary judgment. On February 14, 2013, the Federal Court dismissed both the Wolfe and LMPERS Actions for lack of subject matter jurisdiction. On March 15, 2013, plaintiffs in both the Wolfe and LMPERS Actions filed notices of appeal with the Sixth Circuit Court of Appeals. Wolfe subsequently moved to voluntarily dismiss his appeal on April 18, 2013, and the Sixth Circuit granted his motion the following day. On May 5, 2013, counsel for LMPERS advised the Corporation that it intends to voluntarily dismiss its appeal as well.

Plaintiffs in the Wolfe and LMPERS Actions alleged, in part, that Article Seventh of the Corporation’s articles of incorporation prohibited the special committee from, among other things, evaluating the merger. The Corporation considered these allegations and concluded that the Article is co-extensive with Ohio law and thus allows the Corporation to engage in any activity authorized by Ohio law. The Corporation also has consistently construed Article Seventh as permitting directors to approve a transaction so long as they are both disinterested and independent.

On April 17, 2013, R. David Wolfe filed a new derivative and putative class action (“Wolfe Action II”) in the United States District Court for the Northern District of Ohio against the Corporation’s directors, certain members of the Weiss Family, and the Stone Entities, as well as the Corporation as a nominal defendant. Mr. Wolfe subsequently filed an Amended Complaint on April 29, 2013. The Wolfe Action II seeks a declaratory judgment that Article Seventh precludes the board and special committee from approving the merger. In addition, the Wolfe Action II includes a derivative claim for breach of fiduciary duty against the Corporation’s directors for allegedly violating Article Seventh. Finally, the Wolfe Action II includes both a derivative and class action claim for breach of fiduciary duty against the Weiss Family defendants and the Stone Entities for allegedly seeking to acquire the minority shareholders’ interests at an unfair price. The Corporation’s response to the Wolfe Action II is not yet due.

Management does not believe, based on currently available information, that the outcomes of the proceedings described above will have a material adverse effect on the Corporation’s financial condition, though 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.

PART II

Item 5.

Item 5.

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

Prior to the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchasesclosing of Equity Securities

Market Information. Ourthe Merger on August 9, 2013, our Class A common shares arewere listed on the New York Stock Exchange under the symbol AM. The high and low sales prices, as reported in the New York Stock Exchange listing, for the years ended February 28, 2013 and February 29, 2012, were as follows:

There is no public market for our Class B common shares. Pursuant to our Amended and Restated Articles of Incorporation,As a holder of Class B common shares may not transfer Class B common shares (except to permitted transferees, a group that generally includes members of the holder’s extended family, family trusts and charities) unless the holder first offers such shares to American Greetings for purchase at the most recent closing price for our Class A common shares. If we do not purchase such Class B common shares, the holder must convert the shares, on a share for share basis, into Class A common shares prior to any transfer.

Wells Fargo, St. Paul, Minnesota, is our registrar and transfer agent.

Shareholders. At February 28, 2013, there were approximately 11,900 holders of Class A common shares and 126 holders of Class B common shares of record and individual participants in security position listings.

Dividends. The following table sets forth the dividends declared by us in fiscal years 2013 and 2012.

Payment of dividends is determined by the Board of Directors in light of appropriate business conditions. Under the Merger Agreement, if the Board of Directors so determines prior to the completionresult of the Merger, we are permitted to declare and pay one quarterly dividend onno longer have a class of equity that is publicly traded; rather, all of our Class A common shares and Class Bare held by CIHC.

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

Dividends. We paid the following dividends to $0.15 per share, consistent with prior timing. The Merger Agreement prohibits us from declaring or paying any other dividends on our Class A common shares or Class B common shares.sole shareholder during the past two fiscal years:

In addition, our

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.

Securities Authorized for Issuance Under Equity Compensation Plans. Please refer to the information set forth under the heading “Equity Compensation Plan Information” included in Item 12 of this Annual Report.

Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities.None.

None.

Purchases of Equity Securities by the Issuer and Affiliated PurchasersPurchasers..

We did not purchase any equity securities in the three months ended February 28, 2013.29, 2016.

On July 24, 2012, American Greetings announced that its Board of Directors authorized a program to repurchase up to $75 million of its Class A common shares. Under this program, the share repurchases may be made through open market purchases or privately negotiated transactions as market conditions warrant, at prices the Corporation deems appropriate, and subject to applicable legal requirements and other factors. There is no set expiration date for this program; however, purchases under this program have been suspended due to the Going Private Proposal referred to in Note 19, “Proposal by Members of the Weiss Family and Related Entities to Acquire the Corporation,” to the Consolidated Financial Statements under Part II, Item 8 of this Annual Report.

In addition, pursuant to our Amended and Restated Articles of Incorporation, a holder of Class B common shares may not transfer such Class B common shares (except to permitted transferees, a group that generally includes members of the holder’s extended family, family trusts and charities) unless such holder first offers such shares to the Corporation for purchase at the most recent closing price for the Corporation’s Class A common shares. If the Corporation does not purchase such Class B common shares, the holder must convert such shares, on a share for share basis, into Class A common shares prior to any transfer. It was the Corporation’s general policy to repurchase Class B common shares in accordance with the terms set forth in our Amended and Restated Articles of Incorporation, whenever they are offered by a holder, unless such repurchase is not otherwise permitted under agreements to which the Corporation is a party; however, repurchases of Class B common shares were suspended following our receipt of the Going Private Proposal.

Item 6. Selected Financial Data

Thousands of dollars except share and per share amounts

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 are the world’s largest publicly owned creator, manufacturerdesign, manufacture, distribute and distributor ofsell social expression products.products including everyday and seasonal greeting cards. Headquartered in Cleveland, Ohio, as of February 28, 2013,29, 2016, we employed approximately 25,40027,500 associates around the world and are home to one of the world’s largest creative studios.

Our major domestic greeting card brands areinclude American Greetings, Recycled Paper Greetings, Papyrus, Carlton Cards, Gibson, Tender Thoughts, and Just For You.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, and AGI In-Store display fixtures.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 areinclude AmericanGreetings.com, BlueMountain.com, Egreetings.comjustwink.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 approximately 60 other countries.countries around the world. As of February 28, 2013,29, 2016, we also operated approximately 400397 card and gift retail stores throughout the United Kingdom.UK.

During 2013,Business Strategy

Our objective is to continue to expand our total revenue, operating resultsposition as a leading creator, manufacturer and cash flows were impacteddistributor of social expression products by generating innovative products and services to meet the multiple actions affecting us duringconsumers’ needs to connect, express and celebrate life’s special moments. Our key strategic initiatives are to grow the year including:greeting card business and focus on supply chain management and drive organizational efficiencies.

Although these actions brought volatility to our earnings and make it more difficult to predict future earning levels and patterns, we believe that certain of these actions will help us grow our businesselectronic distribution over the long term. Moreover,term to mitigatemake us the impact that some of these activities may havenatural and preferred greetings solution, as well as capture any shifts in consumer demand.

By focusing on our earnings,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 improve efficienciesconcentrate on ways to create sustainable cost savings by, among other things, continuously balancing the mix of manufacturing and streamline ouroutsourcing 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 our general and administrative expenses. For further discussionAdditionally, 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 the Going Private Proposal, see Note 19, “Proposal by Membersthese 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 2016 was $1.90 billion, a decrease of the Weiss Family and Related Entities to Acquire the Corporation,”approximately $110.2 million or 5.5% compared to the Consolidated Financial Statements under Part II, Item 8prior year. This decrease was primarily driven by the unfavorable impact of this Annual Report.

Acquisition

Our operating results for the year ended February 28, 2013 were significantly affected by certain activities and transactions related to Clinton Cards. Clinton Cards, oneforeign currency translation of the largest specialty retailersapproximately $59 million, lower sales of greeting cards, and the decrease of revenue related to the sale of our display fixtures business at the end of the prior year second quarter and the Strawberry Shortcake character property (“Strawberry Shortcake”) at the beginning of the current year. These amounts were partially offset with increased sales of party goods and gift packaging products.

Operating income for 2016 was $219.0 million compared to $144.4 million in the United Kingdom, had beenprior year, an important customer to our internationalimprovement of $74.6 million. The current and prior years were significantly impacted by business for approximately forty yearstransactions, asset impairments and was oneSBT implementations. The current year includes a gain of our largest customers. The Clinton Cards business had been struggling and in an effort to protect our interests and work more closely with all involved parties, on May 9, 2012, we acquired all of Clinton Cards’ outstanding senior secured debt for $56.6 million. Clinton Cards was subsequently placed into administration, a procedure similar to Chapter 11 bankruptcy in the United States. As part of the administration process, an auction of the assets of the Clinton Cards business was conducted. We participated in the auction process and bid $37.2 million for certain of the assets. The bid took the form of a “credit bid,” where we used a portion of the outstanding senior secured debt owed to us by Clinton Cards to pay the purchase price for the assets.

Our bid was accepted on June 6, 2012, and we expect to acquire approximately 400 stores, together with the related inventory and overhead, as well as the Clinton Cards and related brands. We are operating the acquired stores under the “Clintons” brand. The final number of stores acquired will depend on negotiations with landlords at each respective location, who must generally consent to the assignment of the leases for such stores on terms that are acceptable to us. If we cannot negotiate acceptable lease assignments or if the applicable landlord withholds consent to the assignment of its store lease, then we may close the store and the store lease will be placed back into the administration process. As of February 28, 2013, we have completed 295 lease assignments. The estimated future minimum rental payments for noncancelable operating leases related to these lease assignments are approximately $255 million. In addition, assuming that the remaining landlords consent to terms proposed by us and we are able to successfully complete assignments for all of the approximately 400 stores, the estimated future minimum rental payments for noncancelable operating leases will be approximately $105 million higher, resulting in a total estimated future minimum rental payments for noncancelable operating leases of approximately $360$61.2 million related to acquired stores. Subsequent to year-end,the sale of Strawberry Shortcake, for which we have completed an additional 62 lease assignments. As such, the total numberreceived $105.0 million in cash. The current year also includes income of lease assignments was 357 as of April 24, 2013. The negotiations with landlords are expected to take approximately twelve months$9.1 million from non-income based tax credits received from the closingState of Ohio under certain incentive programs made available to us in connection with the transaction on June 6, 2012.

It is anticipated that the remaining assets not purchased by us will be liquidated and proceeds will be used to repay the creditorsrelocation of Clinton Cards, including us as both the only senior secured lender and the largest unsecured lender. We will seek to recover our $19.4 million remaining senior secured debt claim through the liquidation process. However, based on the estimated recovery information provided by the administrators, we recorded an aggregate charge of $8.1 million in fiscal 2013 relating to the senior secured debt we acquiredworld headquarters within Ohio. These credits had no comparable amounts in the first quarter. The liquidation process was originally expected to take approximately twelve months from the closing of the transaction on June 6, 2012. The process is currently expected to be completed by December 31, 2013.

Separate from the acquired senior secured debt, prior to the acquisition, we had unsecured accounts receivable exposure to Clinton Cards. Based on the expected recovery shortfall on the senior secured debt noted above, we recorded bad debt expense of $16.5 million relating to the unsecured accounts receivable. In addition, with the May 2012 announcement by the administrators that all of Clinton Cards’ Birthdays (“Birthdays”) branded retail stores would be liquidated during the first quarter of fiscal 2013, we recorded an impairment charge of approximately $4.0 million for the deferred costs related to our supply agreement associated with the Birthdays stores. We have also incurred approximately $7.1 million of transaction costs related to the Clinton Cards acquisition.year.

The table below summarizes the charges described above and their impact on our Consolidated Statement of Income during the year ended February 28, 2013:

In addition, current year operating income includes non-cash net contract asset impairment charges of approximately $8 million, primarily related to the charges summarized above, our results were also affected by the operating results of our new Retail Operations segment and the intersegment sales elimination and intercompany profit adjustments betweena change in expected future economic benefit on certain fixed term customer agreements in the International Social Expression Products segment, and a non-cash fixed asset impairment charge of $4.1 million within the Retail Operations segment. SinceThe current year includes the unfavorable impact of approximately $5 million related to SBT implementations.

Operating income in the prior year period included a gain on the sale of the fixtures business of $35.0 million, loss on the sale of 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 a customer bankruptcy, fixed asset impairment charges of $3.7 million and the unfavorable impact of approximately $6 million related to SBT implementations.

Excluding the impact of the business transactions, asset impairments and SBT implementations, operating income was higher in the current year compared to the prior year, driven by higher earnings within the Retail Operations segment is consolidated on a one-month lag correspondingalong with its fiscal year-end of February 2 for 2013,lower variable compensation expense within the operating results of thisUnallocated segment, include only eight months of activityoffset by lower earnings in the current fiscal year. The impact of the acquisition of the retail stores on consolidated revenue for the year ended February 28, 2013 was a net increase of approximately $188 million. The net increase was comprised of approximately $244 million of revenue from the new Retail Operations segment, reduced by approximately $56 million for the elimination of intersegment sales from the International Social Expression Products segment to the Retail Operations segment. For comparison purposes, the sales being eliminated inand North American Social Expression Products segments.

Capital expenditures during the current period would have been third-party sales inyear were approximately $86.0 million, a decrease of approximately $5.1 million from the prior year.

For 2013, the Clinton Cards acquisition adversely impacted The decrease in capital expenditures compared to 2015 related primarily to lower investments within our operating income by $32.0 million. The charges of $35.7 million summarized in the table above were partially offset by the combination of Retail Operations segment operating incomeand a prior year purchase of $6.6 million anda new building in the intersegment profit adjustment associated with intercompany sales from theUK within our International Social Expression Products segment, substantially offset by increased investment in our systems refresh project.

RESULTS OF OPERATIONS

Comparison of the years ended February 29, 2016 and February 28, 2015

In 2016, net income was $129.8 million compared to the Retail Operations segment of $2.9 million.$65.1 million in 2015.

Operating ResultsOur results for 2016 and 2015 are summarized below:

Total revenue for 2013 was $1.87

Revenue Overview

During 2016, consolidated net sales were $1.89 billion, up $174 milliondown from $1.99 billion in the prior year. As discussed above, the net impact of the Clinton Cards acquisition added approximately $188This 4.9%, or $96.4 million, in total revenue. In addition, greeting card sales increased approximately $17 million. Partially offsetting these increases were lower sales of gift wrap, party goods and other ancillary products, lower royalty revenues from our licensing business, decreased sales in our fixtures business, the impairment of deferred costs related to our supply agreement associated with the Birthdays stores,decrease was driven by the unfavorable impact of foreign currency translation and the effects of scan-based trading (“SBT”) implementations.

Operating income for 2013 was $94.2 million, down from $150.0 million in the prior year. This $55.8 million decrease includes the $32.0 million unfavorable impact of the Clinton Cards acquisition discussed above. Also unfavorably impacting the current year operating income were costs and fees associated with the Going Private Proposal, additional legal expense, increased marketing expense, higher product related costs, unfavorable product mix, costs related to our systems refresh project and costs related to strategic actions within our International Social Expression Products segment. Our operating income was favorably impacted by lower field sales and merchandiser expense, primarily due to prior year store setup activities for the value channel that did not recur. Lower bad debt expense in the North American Social Expression Products segment also favorably impacted the current year. Prior year operating income included goodwill impairment charges of $27.2 million and a gain of $4.5 million related to the sale of certain minor characters in our intellectual properties portfolio.

With respect to our statement of financial position in 2013, many of the year-over-year variances are related to the Clinton Cards acquisition described above. For example, inventory increased approximately $34 million compared to the prior year, primarily driven by the Clinton Cards acquisition, and to a lesser extent, higher unit costs. The increases in accounts payable and accrued liabilities were also primarily the result of the Clinton Cards acquisition, but were also impacted by activities related to our information systems refresh project and other strategic projects. Capital expenditures during the year increased approximately $36 million from the prior period. This increase was primarily related to our information systems refresh project and the refurbishment of retail stores in connection with our Clinton Cards acquisition. We expect that capital expenditures will remain higher than historic levels as we execute our multi-year information systems refresh and other strategic projects, but we also expect capital expenditures to be lower in fiscal 2014 than the levels experienced in fiscal 2013 and 2012.

RESULTS OF OPERATIONS

Comparison of the years ended February 28, 2013 and February 29, 2012

In 2013, net income was $49.9 million, or $1.47 per diluted share, compared to $57.2 million, or $1.42 per diluted share, in 2012.

Our results for 2013 and 2012 are summarized below:

Revenue Overview

During 2013, consolidated net sales were $1.84 billion, up from $1.66 billion in the prior year. This 10.8%, or $179.3 million, increase was primarily related to the purchase of retail stores from Clinton Cards which caused an increase in net sales of approximately $187$59 million, compared to prior year. The increase was comprised of approximately $243 million of netlower sales from the new Retail Operations segment, reduced by approximately $56 million for the elimination of intersegment sales from the International Social Expression Products segment to the Retail Operations segment. For comparison purposes, the sales being eliminated in the current period would have been third-party salesour display fixtures business, which was sold in the prior year to Clinton Cards stores thatsecond quarter, of approximately $20 million, lower sales of greeting cards of approximately $33 million, and the unfavorable impact of higher contract asset impairments (net of the recovery) of approximately $3 million. These decreases were not ownedpartially offset by us at that time. In addition, greeting cardincreased sales through our wholesale divisions improved approximately $17 million. More than offsetting these increases were reduced gift packaging,of party goods and other ancillary product salesgift packaging products of approximately $11 million lower net sales in our fixtures businessand $7 million, respectively, and the favorable impact of fewer SBT implementations of approximately $4 million and a $4 million impairment of deferred costs related to the supply agreement associated with the Birthdays stores that were closed as part of the Clinton Cards administration process. Foreign currency translation and SBT implementations unfavorably impacted net sales versus the prior year by approximately $4 million and $2 million, respectively.$1 million.

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

Other revenue, which is primarily driven by royalty revenue from our character properties, decreased $13.8 million from $24.6 million during 2015 to $10.8 million in 2016. The year-over-year decrease is primarily due to the sale of Strawberry Shortcake, and Care Bears properties, decreased $5.7 million from $31.9 million during 2012which was completed in March 2015. As such, royalty revenue related to $26.2 millionStrawberry Shortcake for the prior year does not have a comparative amount in 2013.the current year.

Wholesale Unit and Pricing Analysis for Greeting Cards

Unit and pricing comparatives (on a sales less returns basis) for 20132016 and 20122015 are summarized below:

During 2013,2016, total wholesale greeting card sales less returns increased 1.3%,decreased 0.9% compared to the prior year, with a 0.3% improvement2.3% decrease in unit volume and a 1.0%partially offset by an increase in selling prices.prices of 1.5%. The overall increasedecrease was driven primarily driven by increasesdecreases in unit volume and selling prices from both our everyday and seasonal greeting cards in our North American Social Expression Products and International Social Expression Products segments. Partially offsetting these decreases were increases in selling prices from our everyday greeting cards in our North American Social Expression Products segment and seasonal greeting cards in our International Social Expression Products segment.

Everyday card sales less returns were up 0.1%,down 0.9% compared to the prior year, as a result of increaseda decrease of 2.8% in unit volume, partially offset by an increase in selling prices of 0.3%2.0%. The increase in selling prices was driven primarily by general price increases, which more than offset the continued unfavorable shift to a higher proportion of value cards. The unit volume decline was primarily driven by soft retail productivity within our North American Social Expression Products and International Social Expression Products segments.

Seasonal card sales less returns decreased 1.0%, with unit volume decreasing by 1.3%, partially offset by a declineselling price, which increased 0.3%. The decrease in unit volume of 0.3%. Bothwas attributable to our Valentine’s Day and Easter programs in both our North American Social Expression Products and International Social Expression Products segments and the selling price increase andChristmas program in our International Social Expression Products segment. These decreases were partially offset by unit volume decrease were driven byincreases 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 continued shift to a higher proportion of value cards was more than offset by general price increases. These impacts were partially offset by decreases in selling prices and unit volume improvement within our International Social Expression Products segment.

Seasonal card sales less returns increased 4.0%, with increases in unit volume of 1.6% and selling prices of 2.3%. The improvement in unit volume was driven by both of our greeting card segments and was primarily attributable to our Mother’s Day and Graduation programs. This improvement was partially offset by a decline in unit volume related to our Easter program. The increase in selling prices was primarily driven by our Valentine’s Day program in both our North American Social Expression Products and International Social Expression Products segments, our Mother’s Day program in our North American Social Expression Products segment across all ofand our seasonal card programs.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 20132016 were $817.7$844.8 million, an increasea decrease of $76.1$37.5 million from $741.6$882.3 million in the prior year. As a percentage of total revenue, these costs were 43.8%44.4% in both 2013 and 2012.2016 compared to 43.9% in 2015. The new retail operations we purchased from Clinton Cards caused a net increase in MLOPCdollar decrease was primarily due to the favorable impact of foreign currency translation of approximately $43$27 million, duringthe elimination of approximately $20 million of costs related to the display fixtures business that was sold in the prior year second quarter, the favorable impact on lower sales in our wholesale business and higher gross margin on consistent sales in our Retail Operations segment, and the positive impact of a smaller inventory build of intercompany-supplied products in the Retail Operations segment in the current year compared to the prior year. This net increase was comprisedyear, and thus less elimination of approximately $96 million for cost of goods sold through the new Retail Operations segment, reduced by approximately $53 million for the adjustment to cost of goods related to intersegment sales from the International Social Expression Products segment to the Retail Operations segment. Excluding the impact of the Retail Operations segment, MLOPC increased by approximately $33 million. Of this increase, approximately $28 million was attributable primarily to a combination ofintercompany profit in inventory, year-over-year. Partially offsetting these decreases were higher product content costsof approximately $6 million and an unfavorable change in sales mix, including the continued shift toward a higher proportionproduction expenses of value cards while maintaining a relatively consistent net sales level. Also contributing to the increase in MLOPC was approximately $4 million of higher scrap expense and approximately $3 million of higher costs associated with in-store product displays.$15 million.

Selling, distribution and marketing expenses (“SDM”) for 20132016 were $653.9$656.8 million, increasinga decrease of $39.7 million from $533.8$696.5 million in the prior year. The increaseAs a percentage of $120.1 milliontotal revenue, these costs were 34.6% in both the current year and prior year. The dollar decrease was primarily driven by the favorable impact of foreign currency translation of approximately $126$27 million, lower supply chain costs of approximately $5 million, the elimination of approximately $2 million related to the display fixtures business that was sold in the prior year second quarter, lower store operating expenses withinin our new Retail Operations segment. Also contributing to the increase were higher marketing and product management expensessegment of approximately $7 million. These increases were partially offset by lower agency fees related to our licensing business$2 million and other general cost savings of approximately $4 million and lower costs in our field service and merchandiser organization of approximately $8 million, primarily related to prior year store setup activities for the value channel, which did not recur in the current period.$3 million.

Administrative and general expenses for 2016 were $298.6$253.0 million, in 2013, an increasea decrease of $36.4 million from $250.7$289.4 million in the prior year. The increase of $47.9 millionThis decrease was driven partiallyprimarily by approximately $17 million of higher bad debtlower variable compensation expense recorded in the UK. The increased bad debt expensecurrent year of approximately $14 million, the favorable impact of foreign currency translation of approximately $5 million, the elimination of approximately $2 million related to unsecured accounts receivablethe display fixtures business that was sold in the prior year second quarter, the elimination of Clinton Cards being written off after Clintons was placed into administration duringexpenses related to the current year. Expenses within our new Retail Operations segment added approximately $16 million. Transaction costsformer stock compensation program of approximately $7 million, approximately $7 million of lower costs in this category related to the purchaseour Retail Operations segment and other general cost savings of approximately $1 million.

A non-cash intangible asset impairment charge of $21.9 million was recorded in 2015, which fully impaired the senior secured debt and the retail store acquisition of Clinton Cards were also recorded duringtradename. There was no comparable charge in the current year. Costs and fees associated with the Going Private Proposal, higher legal expense and increased costs incurred in connection with our information technology systems refresh project added approximately $7 million, $9 million and $3 million, respectively. These increases were partially offset by reduced bad debt expense primarily within our North American Social Expression Products segment, lower administrative costs within our International Social Expression Products segment due to overhead cost savings initiatives and lower profit-sharing plan expenses of approximately $5 million, $4 million and $2 million, respectively.

During the prior year, goodwill impairment charges of $27.2 million were recorded. In the fourth quarter of 2012, our market capitalization significantly declined as a result of decreases in our stock price. In connection with the preparation of our annual financial statements, we concluded that the decline in the stock price and market capitalization were indicators of potential impairment which required the performance of an impairment analysis. Based on this analysis, it was determined that the fair values of our North American Social Expression Products segment, which is also the reporting unit, and our reporting unit located in the UK (“UK Reporting Unit”) within the International Social Expression Products segment, were less than their carrying values. As a result, we recorded non-cash goodwill impairment charges of $21.3 million and $5.9 million, respectively, which included all of the goodwill for the North American Social Expression Products segment and the UK Reporting Unit.

Other operating expenseincome - net was $4.3$72.9 million during the current year compared to income of $8.2$23.7 million in the prior year. The increasecurrent year includes a gain on the sale of Strawberry Shortcake of $61.2 million and income of $9.1 million from the non-income based tax credits received from the State of Ohio under certain incentive programs made available to us in net expense was primarily attributable toconnection with the relocation of our world headquarters within Ohio. The prior year included a gain on the sale of our display fixtures business, AGI In-Store, of $35.0 million, partially offset by a non-cash loss recorded upon sale of our current world headquarters location of $15.5 million. In addition, in the prior year, based on updated estimated recovery information provided in connection with the Clinton Cards bankruptcy administration, we recorded an impairment of $8.1 millionrecovery related to the senior secured debt of Clinton Cards that we acquired in 2013. In addition,May 2012 and subsequently impaired. The recovery was $3.4 million in the prior year included a gain of $4.5 million from the sale of certain minor characters within our intellectual properties portfolio.year.

Interest expense was $17.9$27.2 million during the current year, down from $53.1$36.0 million in 2012.the prior year. The decrease of $35.2$8.8 million was primarily attributable to lower debt levels in the debt refinancing that occurred duringcurrent year, as a result of $140 million of prepayments on our term loans in the fourth quarter of 2012 that did not recur. In conjunction with2015 and the issuance of new 7.375% senior notes due 2021, we retired our 7.375% senior notes due 2016 and our 7.375% notes due 2016. As a result, we recorded $21.7 million for the write-offfirst quarter of the unamortized discount and deferred financing costs associated withcurrent year. For further information related to our borrowings, see Note 11, “Debt,” to the retired debt and a chargeConsolidated Financial Statements under Part II, Item 8 of $9.1 million for the consent payment, tender fees, call premiums and other fees associated with the refinancing.this Annual Report.

Other non-operatingInterest income was $9.2$0.4 million during 2013in the current year compared to expense of $0.1$2.6 million during 2012. The 2013 results included a gain of $4.3 million related to the sale of a portion of our investment in the common stockprior year. During the prior year, as part of Party City Holdings, Inc. (“Party City”). The remaining increasethe Clinton Cards bankruptcy administration, we received a cash distribution as part of the liquidation process that included $2.5 million of interest on our senior secured debt of Clinton Cards that was primarily duepreviously not expected to a year-over-year change in foreign currency gains and losses of $4.1 million.be received.

The effective tax rate was 41.9%32.0% and 41.5%41.2% during 20132016 and 2012, respectively.The higher2015, respectively. The lower than statutory tax rate in 2013for the current fiscal year was primarily due to certain nondeductible expenses incurred as a resultthe domestic production activities deduction, the tax treatment of corporate-owned life insurance, the benefit of dual consolidated losses of the Clinton Cards acquisition as well as certain items includable as taxable income which did notCorporation’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 corresponding book income amounts also as a result of the Clinton Cards transaction.lower tax rates. The higher than statutory tax rate in 2012the prior year was primarily due to the goodwill impairment charge forsurrender 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 UK Reporting Unit, which was nondeductible.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 International Social Expression Products segments primarily design, manufacture and sellsells greeting cards and other related products through various channels of distribution with mass retailersmerchandising as the primary channel. The International Social Expression Products segment primarily designs and sells greeting cards and other related products through various channels of distribution and is located principally in the 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, productionsourcing processes, types of customers and

distribution methods. At February 28, 2013,29, 2016, we operated approximately 400397 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 17,19, “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

Total revenue of our North American Social Expression Products segment increased $16.7$0.7 million compared to the prior year. The prior year included a contract asset impairment and the current year includes a slight recovery of that impairment, causing a net year-over-year favorable variance of approximately $5 million. The remaining increase was primarily driven by increased sales of gift packaging, party goods and other ancillary products of approximately $23 million, and the favorable impact of fewer SBT implementations during the year of approximately $1 million. These improvements were offset by the unfavorable impact of foreign currency translation of approximately $14 million, and lower sales of greeting cards of approximately $14 million.

Segment earnings increased $10.7 million compared to the prior year. The increase was driven primarily driven by the prior year 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, and the contract asset impairment noted above. In addition, the current year includes the impact of higher sales in seasonal greeting cardsrevenue before the impact of foreign currency translation, which provided approximately $2 million of additional gross margin, offset by the unfavorable impact of foreign currency translation of approximately $15$5 million and other consumer products such as party goods, stationery and gift packaginghigher technology costs of approximately $4 million. Partially offsetting these increases were lower sales of everyday greeting cards of approximately $3 million.

Segment earnings increased $10.4 million in 2013 compared to the prior year. The increase is attributable to a goodwill impairment charge of approximately $21 million in 2012 that did not recur in the current year as well lower supply chain costs and lower bad debt expense of approximately $7 million and $5 million, respectively. The lower supply chain costs, specifically field sales and merchandiser expenses, were primarily driven by prior year store setup activities for the value channel, which did not recur in the current period. These favorable variances were partially offset by higher marketing and product management expenses of approximately $10 million, increased product related costs of approximately $6 million, higher in-store product display costs of approximately $4 million, increased scrap expense of approximately $2 million and approximately $3 million of higher costs related to our technology refresh project. Gross margin dollars improved slightly due to higher sales volume, partially offset by unfavorable product mix as a result of a continued shift to a higher proportion of lower margin value cards.

International Social Expression Products Segment

Total revenue of our International Social Expression Products segment decreased $72.0$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

Total revenue of our Retail Operations segment decreased $23 million compared to the prior year. The decrease was driven primarily by the eliminationunfavorable impact of intersegment sales to the Retail Operations segment of $55.9 million. For comparison purposes, the sales being eliminated would have been third-party sales in the prior year to Clinton Cards stores that were not owned by us at that time. The remaining decreaseforeign currency translation of approximately $16 million for$23 million. During the current year, net sales at stores open one year or more were higher by approximately 1.2% compared to the prior year.

Segment loss decreased $12.1 million compared to the prior year. The decrease was driven primarily by a combination of lower sales of both gift packagingstore operating and other ancillary products of approximately $6 million each, primarily due to the divestiture of an insignificant non-card product line. Also contributing to the lower revenue was an impairment of deferredoverhead costs of approximately $4$9 million, related toa slightly higher gross margin on flat sales before the supply agreement associated withimpact of foreign currency translation, and the Birthdays stores that were closed as partnet favorable impact of foreign exchange translation on the Clinton Cards administration process. Partially offsetting these decreases were higher sales of everyday greeting cardsloss of approximately $2 million. The sales shortfall resulting from Clinton Cards retail store closings were mostly offset by higher sales to other customers. Foreign currency translation unfavorably impacted sales by approximately $3 million for the current year.

Segment earnings decreased $33.7 million compared toand prior year. The current year included approximately $17 million of bad debt expense due to Clinton Cards being placed into administration and anresults include fixed asset impairment of deferred costscharges of approximately $4$4.1 million related to the supply agreement associated with the Birthdays stores that were closed as part of the Clinton Cards administration process. Earnings also decreased by approximately $17and $3.7 million, for the current year due to a combination of lower sales volume, unfavorable mix and higher scrap expense. Also contributing to the decrease in earnings was the adjustment of approximately $3 million associated with intersegment earnings generated from sales to the Retail Operations segment. This adjustment reduced consolidated inventory for intercompany profit in the Retail Operations segment’s inventory and deferred the recognition of this profit in the International Social Expression Products segment’s earnings until the inventory is sold to the ultimate customer in the Retail Operations segment. In addition, segment earnings decreased by approximately $3 million as a result of strategic business actions, including the divestiture of a small non-card product line and the closure of a small gift wrap manufacturing facility in Italy. These decreases were partially offset by a prior year goodwill impairment charge of approximately $6 million that did not recur in the current year and lower general and administrative costs of approximately $5 million primarily related to overhead cost savings initiatives.respectively.

Retail Operations Segment

As a result of the June 6, 2012 Clinton Cards acquisition, during 2013 we operated approximately 400 retail stores in the United Kingdom that we are operating under the “Clintons” brand. The retail operations are consolidated on a one-month lag corresponding with a fiscal year-end of February 2 for fiscal 2013. As such, the operating results of the Retail Operations segment for the current year include only eight months of activity, beginning June 6, 2012, the date of acquisition. The segment earnings of $6.6 million in the current year included start-up and transitional costs of $7.7 million related to the actions taken to execute our strategy to stabilize and improve the profitability of the stores acquired.

AG Interactive Segment

Total revenue of our AG Interactive segment decreased $4.1$2.5 million compared to the prior year. The decrease in revenue was primarily driven by lower subscription revenue from advertising. Atand the unfavorable impact of foreign currency translation of approximately $1 million. As of February 28, 2013,29, 2016, AG Interactive had approximately 3.73.4 million online paid subscriptions as compared to approximately 3.83.5 million at February 29, 2012.28, 2015.

Segment earnings increaseddecreased $2.5 million in the current year, primarily due to decreased revenue and the unfavorable impact of foreign currency translation of approximately $1 million.

Non-reportable Segment

Total revenue from our Non-reportable segment decreased $34.0 million compared to the prior year. The impactApproximately $20 million of decreasedthe decrease is related to sales administration, product managementin the prior year of the display fixtures business that was sold at the end of the prior year second quarter, and marketing costs is partiallya decrease in revenue of approximately $14 million due to the sale of Strawberry Shortcake in March of the current year.

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 lower sales and higher technology costs.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 compensation401(k) match expense. Unallocated items also includedinclude costs associated with corporate operations such as the senior management, corporate finance, legal and insurance programs. In 2013, unallocated items included

Interest expense for the current year decreased approximately $15$8.8 million, primarily attributable to lower debt levels in the current year, as a result of $140 million of prepayments on our term loans in the fourth quarter of 2015 and the first quarter of the current year. 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.

Corporate overhead expense in the current year includes income of $9.1 million from non-income based tax credits received from the State of Ohio for certain charges associatedincentive programs made available to us in connection with the activitiesrelocation of our world headquarters within Ohio. See Note 4, “Other Income and transactions relatedExpense,” to the Clinton Cards acquisition, approximately $7Consolidated Financial Statements under Part II, Item 8 of this Annual Report for further information. Corporate overhead expense in the prior year included the gain on sale of our display fixtures business of $35.0 million related to the Going Private Proposal as well as approximately $9 million of higher legal expenses. Partially offsetting these increases wasand a gain of $4.3 millionloss on disposal related to the sale of Party City common stock.our world headquarters location. In 2012, unallocated items includedconjunction with the sale, we incurred a total non-cash loss on extinguishmentdisposal of debt$15.5 million, of which $2.2 million was recorded within the Unallocated segment. In addition, a non-cash intangible asset impairment charge of $21.9 million was recorded in 2015, which fully impaired the Clinton Cards tradename. Also, variable compensation was approximately $31 million.$20 million less in the current year compared to 2015.

(Dollars in thousands)		2013				2012
Interest expense		$	(17,896	)		$	(53,073	)
Profit-sharing expense			(7,536	)			(9,401	)
Stock-based compensation expense			(10,743	)			(10,982	)
Corporate overhead expense			(54,167	)			(29,636	)
Total Unallocated		$	(90,342	)		$	(103,092	)

Comparison of the years ended February 29, 201228, 2015 and February 28, 20112014

In 2012,2015, net income was $57.2$65.1 million or $1.42 per diluted share, compared to $87.0$50.5 million or $2.11 per diluted share, in 2011.2014.

Our results for 20122015 and 20112014 are summarized below: