UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended February 28, 201429, 2016

OR

For the transition period fromto

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:

None.

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

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

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

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

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

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

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

State the aggregate market value of the voting and non-voting stock held by non-affiliates of the registrant as of the last business day of the registrant’s most recently completed second fiscal quarter: All of the outstanding capital stock of the registrant is held by Century Intermediate Holding Company and, as such, there is no market for the capital stock of the registrant. As of June 2, 2014May 26, 2016 and August 30, 2013,28, 2015, 100 shares of the registrant’s common stock, par value $0.01 per share, were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None.

AMERICAN GREETINGS CORPORATION

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.

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 and operate approximately 400February 29, 2016, operated 397 card and gift retail stores throughout the United Kingdom. In addition, until its sale in August 2014, we operated a fixture manufacturing business through which we manufactured custom display fixtures for our products and the products of others. Our fiscal year ends on February 28 or 29. References to a particular year refer to the fiscal year ending in February of that year. For example, 20142016 refers to the fiscal year ended February 28, 2014.29, 2016. The Corporation’s Retail Operations segment is consolidated on a one-month lag corresponding with its fiscal year endyear-end of February 2, 2014.January 30, 2016.

2013 Going Private Transaction

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

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

New World Headquarters

During May 2011, American Greetings announced that it plans to relocate its world headquarters to the Crocker Park mixed use development in Westlake, Ohio, which offers a vibrant urban setting, with retail stores and restaurants, offices and apartments. After putting the project on hold pending the outcome of the Going Private Proposal, the Corporation announced plans in October 2013 to resume the project and on March 26, 2014, we purchased the land on which the new world headquarters will be built. The Corporation intends to lease the real property to H L & L Property Company, a Delaware corporation and indirect affiliate of American Greetings (“H L & L”), that will build the new world headquarters on the site. We expect to enter into an operating lease with H L & L for the use of the new world headquarters building, which we expect to be ready for occupancy in approximately two years. Further details of the relocation undertaking are provided in Part III, Item 13 of this Annual Report, under “Related Persons Transactions – World headquarters relocation.”

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 DesignWare party goods and Plus Mark gift wrap and boxed cards. Electronic greetings and other digital content, services and products are available through our subsidiary, AG Interactive, Inc. Our major Internet brands areinclude AmericanGreetings.com, BlueMountain.com, justwink.com and Cardstore.com. We also create and license our intellectual properties, such as the “Care Bears” characters. Prior to August 2014, we also produced AGI In-Store display fixtures for our products and “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, 2014,29, 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 19 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report.

Concentration of Credit Risks

Net sales to our five largest customers, which include mass merchandisers, accounted for approximately 42% of total revenue in 2016 and approximately 40% of total revenue in 2015 and 39% of total revenue in each of 2014 and 2013, and approximately 42% of total revenue in 2012.2014. Net sales to Wal-Mart Stores, Inc. and its subsidiaries accounted for approximately 14%15% of total revenue in 2016, and approximately 14% in each of 2014, 20132015 and 2012.2014. Net sales to Target Corporation accounted for approximately 14% of total revenue in 2016, and approximately 13% of total revenue in each of 20142015 and 2013, and 14% of total revenue in 2012.2014. No other customer accounted for 10% or more of our consolidated total revenue in 2014, 20132016, 2015 or 2012.2014. Approximately 58% of the North American Social Expression Products segment’s revenue in 2014, and approximately 55% of the North American Social Expression Products segment’s revenue in each of 20132016, 2015 and 20122014 was attributable to its top five customers. Approximately 59%, 54% and 50% of the International Social Expression Products segment’s revenue in 2016, 2015 and 2014, and 48% of the International Social Expression Products segment’s revenue in 2013 and 2012,respectively, excluding sales to the Retail Operations segment, was attributable to its top 3three customers.

Consumers

We believe that over 80% of American adults purchase greeting cards each year for multiple occasions including birthdays, holidays, weddings, anniversaries and others. We also believe that women purchase the majority of all greeting cards sold and that the average age of our consumer is in the mid to late forties.

Competition

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 the primary competitive factors include quality, design, customer servicein attracting and retaining customers are:

With the expansion of the Internet as a distribution channel for greeting cards, together with the growing use of technology by consumers to create personalized greeting cards with digital photographs and other personalized content, we are also seeing increased competition from greeting card publishers as well as a wide range of personal publishing, mobile and electronic media businesses distributing greeting cards and other social expression products directly to the individual consumer through the Internet. In general, however, the greeting card business is extremely concentrated. 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.design.

Production and Distribution

In 2014,2016, our channels of distribution continued to be primarily through mass retail, which is comprised of three distinct channels: mass merchandisers; chain drug stores; and supermarkets. In addition, we sell our products through a variety of other distribution channels, including card and gift shops, department stores, military post exchanges, variety stores and combo stores (stores combining food, general merchandise and drug items). We also sell our products through the approximately 400 card and gift retail stores that we operate in the United Kingdom through our Retail Operations segment. In addition, we sell greeting cards through our Cardstore.com Web site, which provides consumers the ability to purchase physical greeting cards, including custom cards that incorporate their own photos and sentiments, as well as to have us send the unique greeting card that they select directly to the recipient. From time to time, we also sell our products to independent, third-party distributors. Our AG Interactive segment provides social expression content, including electronic greeting cards, through 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.suppliers, including suppliers in China and Mexico. Additional information by geographic area is included in Note 19 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report.

Production of our products is generally on a level basis throughout the year, with the exception of gift packaging for which production generally peaks in advance of the Christmas season. Everyday inventories (such as birthday and anniversary 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, 2014,29, 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. 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, 2014,29, 2016, we employed approximately 7,2007,000 full-time employees and approximately 22,10020,500 part-time employees which, when jointly considered, equate to approximately 18,25017,250 full-time equivalent employees. Approximately 800725 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:

Data privacy and security with respect to the collection use, storage, transfer and disposalunauthorized acquisition of personally identifiable consumer information continues to be a focus of worldwide legislation and compliance review. Most states, as well as many regulators, have requirements for the disclosure of certain breaches of security impacting personal data, or other disclosures of personal data.sensitive information. The requirements currently vary by jurisdiction and are subject to frequent changes.

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

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

To resolve some of the remaining legal uncertainty, we expect new United States and foreign laws and regulations to be adopted over time that will be directly or indirectly applicable to the Internet and to our activities. The foregoing and other existing or new legislation, laws, rules, directives, guidelines, regulations or other authority applicable to us could expose us to government investigations or audits, prosecution for violations of applicable laws and/or substantial liability, including penalties, damages, consent decrees, significant attorneys’ fees, expenses necessary to comply with such laws, rules, directives, guidelines, regulations or other authority or the need to modify our business practices.

We post on our Web sites our privacy policies and practices concerning the use and disclosure of user data. Any failure by us to comply with our posted privacy policies, Federal Trade Commission requirements or other privacy-related laws and regulations could result in proceedings that could potentially harm our business, results of operations and financial condition. In this regard, there are a large number of federal and state legislative proposals before the United States Congress and various state and non-U.S. legislative bodies regarding privacy issues related to our business. It is not possible to predict whether or when such legislation may be adopted, and certain proposals, such as required use of disclaimers or explicit opt-in mechanisms, if adopted, could harm our business through a decrease in user registrations and revenues.

Available Information

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

Item 1A.

Risk Factors

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

Risks Related to Our Business

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

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

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

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

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

We have focused and expect to continue to focus our resources on our core greeting card business, developing new, and growing existing business, including by expanding Internet, mobile and other channels of electronic distribution to make American Greetings the natural and preferred social expressions solution, as well as by capturing any shifts in consumer demand. In addition, to the extent we are successful in expanding distribution and revenue in connection with expanding our market leadership, additional capital may be deployed as we may incur incremental costs associated with this expanded distribution, including upfront costs prior to any incremental revenue being generated. If incurred, these costs may be material. We also have been allocating, and expect to continue to allocate over roughly the next five or sixseveral years, resources, including capital, to refreshby modernizing our information technology systems by modernizing our systems, redesigning and deploying new processes, and evolving new organization structures, all of which are intended to drive efficiencies within the business and add new capabilities. The timing of when we spend these amounts may vary from year to year depending on the pacing of the project, but the amounts that we spend could be material in any fiscal year. We currently expect to spend at least an additional $150$195 million, the majority of which we expect will be capital expenditures, over the remaining life of the project.expenditures. We believe these investments are important to our business, helping us drive further efficiencies and add new capabilities; however, there can be no assurance that we will not spend more or less than $150$195 million over the remaining life of the project, or that we will achieve the anticipated efficiencies or any cost savings.

Consumers shifting to value shopping may negatively impact our profitability.

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

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

A few of our customers are material to our business and operations. Net sales to our five largest customers, which include mass merchandisers, accounted for approximately 42% of total revenue in 2016, approximately 40% of total revenue in 2015 and approximately 39% of total revenue for 2014 and 2013, and approximately 42% of total revenue for 2012.in 2014. Approximately 58% of the North American Social Expression Products segment’s revenue in 2014, and 55% of the North American Social Expression Products segment’s revenue in each of 20132016, 2015 and 20122014 was attributable to its top five customers,customers. Approximately 59%, 54% and approximately 50% of the International Social Expression Products segment’s revenue in 2016, 2015 and 2014, and 48% of the International Social Expression Products segment’s revenue in each of 2013 and 2012,respectively, excluding sales to the Retail Operations segment, was attributable to its top three customers. Net sales to Wal-Mart Stores, Inc. and its subsidiaries accounted for approximately 15% of total revenue in 2016, and approximately 14% of total revenue in each of 2014, 20132015 and 2012, and net2014. Net sales to Target Corporation accounted for approximately 14% of total revenue in 2016, and approximately 13% of total revenue in each of 20142015 and 2013, and 14% of total revenue in 2012.2014. There can be no assurance that our large customers will continue to purchase our products in the same quantities that they have in the past. The loss of sales to one of our large customers could materially and adversely affect our business, results of operations, cash flows and financial condition.

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

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

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

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

OnIn April, 17, 2009, we sold our then existing retail operationsNorth American Retail Operations segment, including all 341 of our card and gift retail store assets, to Schurman Fine Papers (“Schurman”), which now operates stores under a number of brands, including the American Greetings, Carlton Cards and Papyrus brands. Although we do not control Schurman, because Schurman is licensing the “Papyrus,” “American Greetings” and “Carlton Cards” names from us for its retail stores, actions taken by Schurman may be seen by the public as actions

taken by us, which, in turn,

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

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

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

In connection with our June 2012 acquisition of assets from Clinton Cards and certain of its subsidiaries (“Clintons”) out of bankruptcy administration, we acquired approximately 400 retail stores together with related inventory and overhead, as well as the Clinton Cards and related brands. We face a number of challenges in expanding into the operations ofoperating a retail business in a foreign country. For example, we have no recent experience in operating retail stores, particularly outside of North America. Although we have engaged a team of advisors to operate the Clinton Cards stores that has extensive specialty retail channel experience, the team consists of employees of Schurman, which has limited operating experiencemarket in the United Kingdom.Kingdom is extremely competitive with some competitors being larger and more well-established. In addition, although Schurman continueswe have and continue to be an important customer, this arrangement may be temporary, in which case we would need to establishface challenges regarding the Clintons brand as a new long-term management team to operateresult of the Clinton Cards stores.negative perceptions, and loss of consumers, following the bankruptcy administration of Clintons. Additionally, we have been and may continue to be required to make capital and other investments in these stores, which could adversely affect their profitability. There are also many factors outside of our control that could adversely affect our ability to operate the Clinton CardsClintons retail stores profitably, including factors that may affect consumer spending on our products, such as negative consumer perception resulting from a United States company owning the Clinton CardsClintons stores, unfavorable economic conditions in the United Kingdom, availability of consumer credit, taxation levels, adverse weather, high fuel prices and low consumer confidence.

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

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

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

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

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

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

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

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

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

The financial position and results of operations of our international subsidiaries are initially recorded in various foreign currencies and then translated into United States dollars at the applicable exchange rate for inclusion in our financial statements. The strengthening of the United States dollar against these foreign currencies ordinarily has a negative impact on our reported sales and operating income (and conversely, the weakening of the United States dollar against these foreign currencies has a positive impact). For the year ended February 28, 2014,29, 2016, foreign currency translation unfavorably affected revenues by $16.6$59.0 million and unfavorably affected income from continuing operations before income taxes by $3.8$2.5 million compared to the year ended February 28, 2013.2015. Certain transactions, particularly in foreign locations, are denominated in other than that location’s local currency. Changes in the exchange rates between the two currencies from the original transaction date to the settlement date will result in a currency transaction gain or loss that directly impacts our reported earnings. For the year ended February 28, 2014,29, 2016, the impact of currency movements on these transactions favorablyunfavorably affected non-operating income by $0.3$1.8 million. The volatility of currency exchange rates may materially and adversely affect our results of operations.

The greeting card and gift packaging industries aresocial expression industry is extremely competitive, and our business, results of operations and financial condition will suffer if we are unable to compete effectively.

The market for social expression products is large, evolving and intensely competitive, and we expect competition to increase in the future with the rapidly growing use by consumers of electronic devices and the Internet to express themselves and to communicate with others. We operate in highly competitive industries. There are a largecompete with the growing number of media by which consumers express themselves and connect with others, whether by way of traditional tangible greeting card publishers incards purchased at retail stores; tangible greeting cards that incorporate personalized messages and/or images purchased at retail stores, over the United StatesInternet or using mobile devices; electronic greeting cards delivered over the Internet or using mobile devices; or social media companies that host and enable mobile access to and posting of greetings and images. We face intense competition from a wide range of companies, ranging from small, family-run organizations to major corporations. With the expansionMany of the Internet as a distribution channel for greeting cards, together with the growing use of technology by consumers to create personalized greeting cards with digital photographs and other personalized content, we are also seeing increased competition from greeting card publishers as well as a wide range of personal publishing, mobile and electronic media businesses distributing greeting cards and other social expression products directly to the individual consumer through the Internet. In general, however, the greeting card business is extremely concentrated. We believe that we are one of only two main suppliers offering a full line of social expression products. Our main competitor, Hallmark Cards, Inc., as well as other companies with which we may compete may have substantially greater financial, technical or marketing resources, a greater customer base, stronger brand or name recognition and a lower cost of funds than we do. Certain of these competitors may also have longstanding relationships with certain large customers to which they may offer products that we do not provide, putting us at a competitive disadvantage. As a result, our competitors may be able to:

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

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

The terms of our borrowing arrangements contain a number of restrictive covenants, including customary operating restrictions that limit our ability to engage in such activities as borrowing and making investments, capital expenditures and distributions on our capital stock, and engaging in mergers, acquisitions and asset sales. We are also subject to customary financial covenants, including a

leverage ratio and an interest coverage ratio. These covenants restrict the amount of our borrowings, reducing our flexibility to fund ongoing operations and strategic

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

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

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

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

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

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

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

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

Our estimate of the potential outcome of uncertain tax issues is subject to our assessment of relevant risks, facts and circumstances existing at the time. We use these assessments to determine the adequacy of our provision for income

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

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

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

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

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

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

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

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

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

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

A portion of our business and results of operations depends upon the appeal of our licensed character properties, which are used to create various toy and entertainment items for children. Consumer preferences, particularly among children, are continuously changing. The children’s entertainment industry experiences significant, sudden and often

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

Our results of operations fluctuate on a seasonal basis.

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

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

During fiscal 2015 we sold our fixtures business and in the first quarter of fiscal 2016 we sold our Strawberry Shortcake property. During fiscal 2014, our fixtures business contributed revenue and operating income to our consolidated results of approximately $49.4 million and $17.4 million, respectively. During fiscal 2015, our Strawberry Shortcake property contributed royalty revenue to our consolidated results of approximately $14.6 million. As a result, our future results of operations will be lower than prior periods unless we are able to replace the revenue and operating income associated with these businesses through our remaining business operations, by means of future acquisitions or otherwise.

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

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

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

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

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

We are party to collective bargaining contracts with our labor unions, which represent a large number of our employees. In particular, approximately 800725 of our employees are unionized and are covered by collective bargaining agreements. Although we believe our relations with our employees are satisfactory, no assurance can be given that we will be able to successfully extend or renegotiate our collective bargaining agreements as they expire from time to time. If we fail to extend or renegotiate our collective bargaining agreements, if disputes with our unions arise, or if our unionized workers engage in a strike or other work relatedwork-related stoppage, we could incur higher ongoing labor costs or experience a significant disruption of operations, which could have a material adverse effect on our business.

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

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

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

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

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

We are subject to numerous federal, state, provincial and foreign laws and regulations governing product safety including, but not limited to, those regulations enforced by the U.S. Consumer Product Safety Commission, Health Canada, UK local authority trading standards departments, UK Health and Safety Executive, and Australia’s Consumer Affairs unit of the Department of Justice. A failure to comply with such laws and regulations, or

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

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

We are subject to general business regulations and laws as well as regulations and laws specifically governing the Internet, e-commerce and e-commerce.cellular communications. Existing and future laws and regulations may impede the growth of the Internet or other online and cellular services. These regulations and laws may cover taxation, restrictions on imports and exports, customs, tariffs, user privacy, data protection, pricing, content, copyrights, distribution, electronic contracts and other communications, consumer protection, the provision of online payment services, broadband residential Internet access and the characteristics and quality of products and services. It is not clear how existing laws governing issues such as property use and ownership, sales and other taxes, fraud, libel and personal privacy apply to the Internet, e-commerce and e-commercecellular technology as the vast majority of these laws were adopted prior to the advent of the Internet and/or text messaging and do not contemplate or

address the unique issues raised by the Internet, e-commerce and/or e-commerce.text messaging. Those laws that do reference the Internet and/or text messaging are only beginning to be interpreted by the courts and their applicability and reach are therefore uncertain. For example, the Digital Millennium Copyright Act, or DMCA is intended, in part, to limit the liability of eligible online service providers for including (or for listing or linking to third-party Web sites that include) materials that infringe copyrights or other rights of others. Portions of the Communications Decency Act, or CDA, are intended to provide statutory protections to online service providers who distribute unrelated third-party content. We rely on the protections provided by both the DMCA and CDA in conducting our online business. Any changes in these laws or judicial interpretations narrowing their protections will subject us to greater risk of liability and may increase our costs of compliance with these regulations or limit our ability to operate certain lines of business. The Video Privacy Protection Act and the Children’s Online Privacy Protection Act isare intended to impose additional restrictions on the ability of online service providers to disclose personally identifiable information about a consumer or collect user information from minors.minors, respectively. The Federal Trade CommissionFTC Act Title 5 – Unfair & Deceptive Acts & Practices prohibits businesses from engaging in unfair or deceptive acts or practices, including by misrepresenting data privacy practices. The TCPA restricts the making of calls, faxes and security. The Protection of Children From Sexual Predators Act of 1998 requires online service providers to report evidence of violations of federal child pornography laws under certain circumstances.texts by an autodialer unless proper consent is obtained or appropriate disclosures are made. In addition, manyany failure or perceived failure by us to comply with our privacy policies or privacy-related obligations to customers or other third parties may result in federal or state governmental enforcement actions, litigation, or negative public attention and could cause our customers to lose trust in us, which could have an adverse effect on our reputation and business. Many foreign jurisdictions, including those in which we do business, currently have significant limitations on the collection, use, storage, transfer and disposal of personal data of consumers and employees, and are considering the European Union’s 1995 Data Protection Directive. The costs of compliance with these regulations may increase in the future as a result of changes in the regulations or the interpretation of them. Further, any failures on our part to comply with these regulations may subject us to significant liabilities. Those current and future laws and regulations or unfavorable resolution of these issues may substantially harm our business and results of operations.

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

An important component of our business involves the receipt and storage of information about our consumers, customers, employees and vendors. A significant challenge to e-commerce and communications is the secure transmission of confidential information over public networks. Our failure to monitor, protect and prevent security breaches could damage our reputation and brands and harm our business and results of operations. In transactions conducted

over the Internet, maintaining complete security for the transmission of confidential information on our Web sites such as customers’ credit card numbers and expiration dates, personal information and billing addresses, is essential to maintain consumer confidence. We have limited influence overconfidence and brand reputation. However, because the security measurestechniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and may be difficult to detect for long periods of third-party online payment service providers.time, we may be unable to anticipate these techniques or implement adequate preventive measures. In addition, hardware, software, or applications we hold certain private information about our customers, such as their names, addresses, phone numbers and purchasing records.

We may not be able to preventdevelop or procure from third parties from stealingmay contain defects in design or manufacture or other problems that could unexpectedly compromise information provided bysecurity. Unauthorized parties may also attempt to gain access to our customers to ussystems or facilities, or those of third parties with whom we do business, through fraud, trickery or other forms of deceiving our Web sites. In addition, anyone who is able to circumvent our security measures could misappropriate proprietary information or cause interruptions in our operations. employees, contractors and temporary staff.

Any compromise of our security could damage our reputation and brands and expose us to a risk of loss or litigation and possible liability, which could substantially harm our business and results of operations. In addition, we may need to devote significant resources to protect against security breaches or to address problems caused by breaches.

Even if we are successful in adapting to and preventing new security breaches, any perception by the public that e-commerce and other online transactions, or the privacy of user information, are becoming increasingly unsafe or vulnerable to attack could inhibit the growth of our businesses.

In addition, any failure or perceived failure by us to comply with our privacy policies or privacy-related obligations to customers or other third parties may result in Federal or state governmental enforcement actions, litigation, or negative public attention and could cause our customers to lose trust in us, which could have an adverse effect on our reputation and business.

Information technology infrastructure failures could significantly affect our business.business.

We depend heavily on our information technology infrastructure in order to achieve our business objectives. Portions of our information technology infrastructure are old and difficult to maintain. We could experience a problem that impairs this infrastructure, such as a computer virus, a problem with the functioning of an important information technology application, or an intentional disruption of our information technology systems. In addition, our information technology systems could suffer damage or interruption from human error, fire, flood, power loss, telecommunications failure, break-ins, terrorist attacks, acts of war and similar

events. The disruptions caused by any such events could impede our ability to record or process orders, manufacture and ship in a timely manner, properly store consumer images, or otherwise carry on our business in the ordinary course. Any such event could impact our ability to create, design or manufacture product, cause us to lose customers or revenue, damage our reputation, and could require us to incur significant expense to eliminate these problems and address related security concerns.

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

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

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

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

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

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

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

None.

Item 2.

Properties

As of February 28, 2014,29, 2016, we owned or leased approximately 8.87.6 million square feet of plant, warehouse and office space throughout the world, of which approximately 512,6001.4 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, 2014,29, 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.

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.”

We are involvedInformation regarding legal proceedings is described in various judicial, administrative, regulatory and arbitration proceedings concerning matters arising inNote 16 to the ordinary courseConsolidated Financial Statements under Part II, Item 8 of business operations, including, but not limited to, employment, commercial disputes and other contractual matters. We, however, do not believe that any of the 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.this Annual Report.

Not applicable.

PART II

Prior to the closing of the Merger on August 9, 2013, our Class A common shares were listed on the New York Stock Exchange under the symbol AM. As a result of the Merger, we no longer have a class of equity that is publicly traded; rather, all of our common shares are held by CIHC. Prior to the Merger, the high and low sales prices of our Class A common shares, as reported in the New York Stock Exchange listing for the year ended February 28, 2013 and the period from March 1, 2013 through August 9, 2013, were as follows:

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

Dividends. Prior toWe paid the closing of the Merger, we paid quarterlyfollowing dividends of $0.15 per Class A common share and Class B common share during fiscal 2013 and during the first two quarters of fiscal 2014. Following the closing of the Merger, we stopped paying a quarterly dividend, but paid one dividend in the total aggregate amount of $18,194,951.06 to our sole shareholder on September 30, 2013, paid a second dividend induring the total aggregate amount of $7,225,246.10 to our sole shareholder on January 2, 2014, and paid a third dividend in the total aggregate amount of $50,000,000 to our sole shareholder on February 10, 2014.past two fiscal years:

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 on Form 10-K.

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

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, 2014.29, 2016.

Item 6.

Selected Financial Data

Thousands of dollars

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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 operate predominantly in a single industry: the design, manufacture, distributiondistribute and sale ofsell social expression products including everyday and seasonal greeting cards and other social expression products.cards. Headquartered in Cleveland, Ohio, as of February 28, 2014,29, 2016, we employed approximately 29,30027,500 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, justwink.com and Cardstore.com.

Our international operations include wholly-owned subsidiaries in the United Kingdom (also referred to herein as “UK”), Canada, Australia and New Zealand as well as licensees in approximately 50 other countries.countries around the world. As of February 28, 2014,29, 2016, we also operated 396397 card and gift retail stores throughout the UK.

Business Strategy

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

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

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

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

Operating Results

Total revenue for 20142016 was $1.97$1.90 billion, up $101a decrease of approximately $110.2 million fromor 5.5% compared to the prior year. This 5.4% increasedecrease was primarily driven by the unfavorable impact of foreign currency translation of approximately $59 million, lower sales of greeting cards, and the decrease of revenue related to the purchasesale of Clinton Cards retail operations duringour display fixtures business at the end of the prior year second quarter. Thequarter and the Strawberry Shortcake character property (“Strawberry Shortcake”) at the beginning of the current year period includes twelve months of sales through Clinton Cards retail stores, while the prior year period includes sales for slightly less than eight months. In total, revenue related to Clinton Cards for 2014year. These amounts were partially offset with increased approximately $91 million compared to the prior year period. Also contributing to the increase in revenue during 2014 were higher sales in our fixtures business of approximately $35 million, of which approximately $26 million was related to a significant contract with a large consumer electronics company that was obtained and completed during the year. In addition, total revenue increased due to higher sales of party goods and gift packaging and party goods. Partially offsetting these increases were reduced sales of greeting cards, lower other ancillary product sales and the unfavorable impact of scan-based trading (“SBT”) implementations. Foreign currency translation had an unfavorable impact on sales of approximately $17 million.products.

Operating income for 20142016 was $136.9$219.0 million compared to $94.2$144.4 million in the prior year, an improvement of approximately $42.7$74.6 million. The current and prior years were significantly impacted by business transactions, asset impairments and SBT implementations. The current year was favorably impactedincludes a gain of $61.2 million related to the sale of Strawberry Shortcake, for which we received $105.0 million in cash. The current year also includes income of $9.1 million from non-income based tax credits received from the State of Ohio under certain incentive programs made available to us in connection with the relocation of our world headquarters within Ohio. These credits had no comparable amounts in the prior year.

In addition, current year operating income includes non-cash net contract asset impairment charges of approximately $8 million, primarily by the North American Social Expression Products segment duerelated to lower spendinga change in expected future economic benefit on marketing and the information systems refresh project, the fixtures business due to higher sales,certain fixed term customer agreements in the International Social Expression Products segment, due to favorable product mix and lower supply chain and scrap expense, lower legal expenses and a gainnon-cash fixed asset impairment charge of $4.1 million within the Retail Operations segment. The current year includes the unfavorable impact of approximately $5 million related to the Clinton’s acquisition. The current year was unfavorably impacted by approximately $28 million of costs related to the Merger, the operating results of the Retail Operations segment, and variable compensation expense. The current year operating income was also unfavorably impacted by approximately $13 million related to SBT implementations, which was approximately $5 million higher than the prior year.implementations.

Operating income in the prior year period included costsa gain on the sale of $35.7the 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 Clinton Cards acquisition, includingunfavorable impact of approximately $17$6 million of bad debt expense, approximately $8 million impairmentrelated to SBT implementations.

Excluding the impact of the Clintons secured debt, approximately $7 million of legalbusiness transactions, asset impairments and advisory fees, and approximately $4 million impairment forSBT implementations, operating income was higher in the deferred costs relatedcurrent year compared to our supply agreement associated with the Clinton Cards’ Birthdays branded stores that were closed as part of the Clinton Cards bankruptcy administration process. The prior year, also included approximately $7 million of costs related todriven by higher earnings within the Merger.Retail Operations segment along with lower variable compensation expense within the Unallocated segment, offset by lower earnings in the International Social Expression Products and North American Social Expression Products segments.

Capital expenditures during the current year were approximately $54$86.0 million, a decrease of approximately $60$5.1 million from the prior period. Thisyear. The decrease wasin capital expenditures compared to 2015 related primarily related to lower spending oninvestments within our informationRetail Operations segment and a prior year purchase of a new building in the UK within our International Social Expression Products segment, substantially offset by increased investment in our systems refresh project and lower spending on manufacturing equipment. We expect that capital expenditures will be generally higher than historic levels as we continue to execute our multi-year information systems refresh and other strategic projects.project.

RESULTS OF OPERATIONS

Comparison of the years ended February 29, 2016 and February 28, 2014 and 20132015

In 2014,2016, net income was $50.5$129.8 million compared to $49.9$65.1 million in 2013.2015.

Our results for 20142016 and 20132015 are summarized below:

Revenue Overview

During 2014,2016, consolidated net sales were $1.94$1.89 billion, updown from $1.84$1.99 billion in the prior year. This 5.4%4.9%, or $99.3$96.4 million, increasedecrease was primarily related to the purchase of Clinton Cards retail operations during the prior year second quarter. The current year period includes twelve months of sales through Clinton Cards retail stores, while the prior year period includes sales for slightly less than eight months. In total, net sales related to Clinton Cards for 2014 increased approximately $91 million compared to the prior year period. Also contributing to the increase in net sales in 2014 were higher sales in our fixtures business of approximately $35 million, of which approximately $26 million was related to a large contract obtained in the current year first quarter, as mentioned in the overview section of this Management’s Discussion and Analysis of Financial Condition and Results of Operations. The remaining year-over-year improvement was due to higher sales of gift packaging and party goods of approximately $6 million and the prior year impairment of deferred costs of approximately $4 million related to the supply agreement associated with Clinton Cards’ Birthdays branded stores that were closed as part of the Clinton Cards bankruptcy administration process. Partially offsetting these increases were reduced greeting cards sales of approximately $5 million, lower other ancillary product sales of approximately $9 million anddriven by the unfavorable impact of foreign currency translation of approximately $59 million, lower sales from our display fixtures business, which was sold in the prior year second 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 partially offset by increased sales of party goods and gift packaging products of approximately $11 million and $7 million, respectively, and the favorable impact of fewer SBT implementations of approximately $17 million and $5 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, increased $1.7 million from $26.2 million during 2013which was completed in March 2015. As such, royalty revenue related to $27.9 millionStrawberry Shortcake for the prior year does not have a comparative amount in 2014.the current year.

Wholesale Unit and Pricing Analysis for Greeting Cards

Unit and pricing comparatives (on a sales less returns basis) for 20142016 and 20132015 are summarized below:

During 2014,2016, total wholesale greeting card sales less returns increased 0.1%,decreased 0.9% compared to the prior year, with a 2.8%2.3% decrease in unit volume partially offset by an increase in selling prices and a 2.6%of 1.5%. The overall decrease was driven primarily by decreases in unit volume. The overall increase was primarily driven byvolume 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 and seasonal greeting cards in both our North American Social Expression Products and our International Social Expression Products segments, mostly offset by decreases in unit volume of everyday cards in both of our greeting card segmentssegment 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 3.1% mostly offset by a decline in unit volume of 2.9%2.0%. The increase in selling price increaseprices was a result ofdriven primarily by general price increases, outpacingwhich more than offset the continued unfavorable shift to a higher proportion of value card sales.cards. The unit volume decline was primarily driven by generally soft unit trends across most distribution channels.retail productivity within our North American Social Expression Products and International Social Expression Products segments.

Seasonal card sales less returns increased 0.1%decreased 1.0%, with an increase inunit volume decreasing by 1.3%, partially offset by selling prices of 2.1% and aprice, which increased 0.3%. The decrease in unit volume of 1.9%. The increasewas attributable to our Valentine’s Day and Easter programs in selling prices was primarily driven by both our North American Social Expression Products and International Social Expression Products segments across most of our seasonal card programs. The declineand the Christmas program in unit volume was driven by our International Social Expression Products segment and was primarily attributable tosegment. These decreases were partially offset by unit volume increases in our Mother’s Day and Father’s Day programs in both our North American Social Expression Products and International Social Expression Products segments and our Christmas program in our North American Social Expression Products segment. The increase in selling prices was driven by our 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 and our Christmas program in our International Social Expression Products segment. Offsetting these increases were decreases in selling prices in our Easter programs.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 20142016 were $857.2$844.8 million, an increasea decrease of $39.5$37.5 million from $817.7$882.3 million in the prior year. As a percentage of total revenue, these costs were 43.5%44.4% in 20142016 compared to 43.8%43.9% in 2013.2015. The retail operations we purchased from Clinton Cards in the prior year second quarter caused a net increase in MLOPC of approximately $37 million during the current year compareddollar decrease was primarily due to the prior year. In addition, the combination of higher sales volume and unfavorable product mix, partially offset by lower costs caused an increase in MLOPC of approximately $7 million. These increases were partially offset by the favorable impact of foreign currency translation of approximately $5$27 million, the 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, and thus less elimination of intercompany profit in inventory, year-over-year. Partially offsetting these decreases were higher product content of approximately $6 million and higher production expenses of approximately $15 million.

Selling, distribution and marketing expenses (“SDM”) for 20142016 were $685.1$656.8 million, increasing $31.2a decrease of $39.7 million from $653.9$696.5 million in the prior year. As a percentage of total revenue, these costs were 34.8%34.6% in both the current year compared to 35.0% in theand prior year. The dollar increasedecrease was primarily driven by higher expenses of approximately $56 million within our Retail Operations segment due to the timing of the Clinton Cards acquisition in the prior year second quarter. The current year period includes twelve months of activity related to Clinton Cards retail stores while the prior year period includes activity for slightly less than eight months. This increase was partially offset by lower sales, marketing and product management expenses of approximately $13 million, the majority of which related to Cardstore.com, lower supply chain costs of approximately $6 million and the favorable impact of foreign currency translation of approximately $6$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 in our Retail Operations segment of approximately $2 million and other general cost savings of approximately $3 million.

Administrative and general expenses for 2016 were $297.4$253.0 million, in 2014, a decrease of $1.2$36.4 million from $298.6$289.4 million in the prior year. TheThis decrease was driven primarily by lower bad debtvariable compensation expense whereby the prior year period included approximately $17 million related to increased unsecured accounts receivable exposure as a result of Clinton Cards being placed into administration. In addition, the prior year period included transaction costs in connection with the acquisition of the Clinton Cards retail operations of approximately $7 million that did not recur in the current year. Also contributing to the decrease were lower legal related expensesyear of approximately $8 million, a year-over-year decrease in costs related to our information technology systems refresh project of approximately $5$14 million, the favorable impact of foreign currency translation of approximately $1$5 million, and general cost savings, of which no items were individually significant,the elimination of approximately $4 million. These decreases were substantially offset by higher costs and fees$2 million related to the Merger of approximately $21 million compared to the prior year period and higher expenses of approximately $9 million within our Retail Operations segment primarily due to the timing of the Clinton Cards acquisitiondisplay fixtures business that was sold in the prior year second quarter. The current year also includes approximately $11 millionquarter, the elimination of higher variable compensation expense primarilyexpenses related to the establishment duringformer stock compensation program of approximately $7 million, approximately $7 million of lower costs in this category related to our 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 Clinton Cards tradename. There was no comparable charge in the current year of a long-term incentive program to replace the prior stock-based compensation programs.year.

Other operating (income) expense –income - net was $7.7$72.9 million of income during the current year compared to $4.3$23.7 million of expense in the prior year. The current 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 connection with the relocation of our world headquarters within Ohio. The prior year included expensesa gain on the sale of $2.1our display fixtures business, AGI In-Store, of $35.0 million, related to the terminationpartially offset by a non-cash loss recorded upon sale of certain agency agreements associated with our licensing business and an impairmentcurrent world headquarters location of $8.1 million related to the senior secured debt of Clinton Cards that we acquired$15.5 million. In addition, in the prior year first quarter. In the current year, based on updated estimated recovery information provided in connection with the Clinton Cards bankruptcy administration, we recorded adjustmentsan impairment recovery related to the senior secured debt of Clinton Cards debt impairment resultingthat we acquired in a gain totaling $4.9 million.May 2012 and subsequently impaired. The recovery was $3.4 million in the prior year.

Interest expense was $27.4$27.2 million during the current year, updown from $17.9$36.0 million in 2013.the prior year. The increasedecrease of $9.5$8.8 million was primarily attributable to increased borrowingslower debt levels in connection with the Merger.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 of the increasedrelated to our borrowings, see Note 11, “Debt,” to the Consolidated Financial Statements under Part II, Item 8 of this Annual Report.

Other non-operatingInterest income was $3.3$0.4 million during 2014in the current year compared to $9.2$2.6 million in 2013. The currentthe prior year. During the prior year, includesas part of the Clinton Cards bankruptcy administration, we received a non-cash impairmentcash distribution as part of $1.9the liquidation process that included $2.5 million relatedof interest on our senior secured debt of Clinton Cards that was previously not expected to our investment in Schurman. Refer to Note 1, “Significant Accounting Policies,” to the Consolidated Financial Statements under Part II, Item 8 of this Annual Report for further information regarding our investment in Schurman. In addition, the current and prior years included gains associated with our investment in Party City Holdings, Inc. (“Party City”) in the amounts of $3.3 million and $4.3 million, respectively. The remaining decrease was primarily due to a year-over-year change in foreign currency gains of $2.5 million.be received.

The effective tax rate was 55.4%32.0% and 41.9%41.2% during 20142016 and 2013,2015, respectively. The lower than statutory rate for the current fiscal year was due to the domestic production activities deduction, the tax treatment of corporate-owned life insurance, the benefit of dual consolidated losses of the Corporation’s branches, changes in uncertain tax benefits, and

federal provision to return adjustments. This decrease was partially offset by losses in our foreign jurisdictions that have lower tax rates. The higher than statutory tax rate in 2014 was due to an increase to the valuation allowance in the amount of $12.6 million against certain net operating loss and foreign tax credit carryforwards that we believe will expire unused and an increase in the state income tax expense due to the receipt of intercompany foreign dividends. The valuation allowance was recorded in accordance with Internal Revenue Code section 382 and 383 due to the Merger as previously disclosed. The higher than statutory tax rate in 2013prior year was primarily due to the surrender of certain nondeductible expenses incurred as a resultcorporate-owned life insurance policies that resulted in an increase in tax expense of $28.3 million. The increase was partially offset by the benefit of dual consolidation losses of our branches totaling $13.3 million and the benefit of the Clinton Cards acquisition as well as certain items includable as taxable income which did not have corresponding book income amounts also as a resultnet release of the Clinton Cards transaction.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, 2014,29, 2016, we operated 396397 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 segmentssegment primarily includeincludes licensing activities and, prior to the disposition of AGI In-Store on August 29, 2014, the design, manufacture and sales of display fixtures.

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

North American Social Expression Products Segment

Total revenue of our North American Social Expression Products segment increased $8.6$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 higher sales of gift packaging and party goods of approximately $9 million, increased greeting card sales of approximately $7 million and higher sales of other ancillary products of approximately $4 million. Partially offsetting these increases were the unfavorable impact of higher SBT implementations and foreign currency translation of approximately $6 million and $5 million, respectively.

Segment earnings increased $12.5 million in 2014 comparedprior year non-cash loss related to the prior year. The increasesale of our current world headquarters location, of which approximately $13 million of the total loss of $15.5 million was driven byrecorded 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 revenuesrevenue before the impact of foreign currency translation, which provided approximately $7$2 million of additional gross margin, net of the unfavorable impact of higher SBT implementations of approximately $6 million, as well as a decrease in sales, marketing and product management expenses of approximately $13 million and lower costs related to our information technology systems refresh project of approximately $5 million. These favorable items were partially offset by an increase in variable compensation expense (as noted above) of approximately $9 million and the unfavorable impact of foreign currency translation of approximately $3$5 million and higher technology costs of approximately $4 million.

International Social Expression Products Segment

Total revenue of our International Social Expression Products segment decreased $26.1$51.2 million compared to the prior year. The decrease was primarily due todriven by the unfavorable impact of foreign currency translation of approximately $21 million, lower sales of greeting cards gift packagingof approximately $20 million, the unfavorable impact of contract asset impairments of approximately $9 million, and decreased sales of other ancillary products of approximately $12$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 $3 million and $8 million, respectively. In addition, foreign currency translation had an unfavorable impact of approximately $8 million for the current year. Partially offsetting these decreases wascompared to the prior year impairment of deferred costs of approximately $4 million related to the supply agreement associated with the Clinton Cards’ Birthdays stores thatyear. The decreased earnings were closed as part of the Clinton Cards bankruptcy administration process that did not recur in the current year andprimarily driven by the impact of lower SBT implementations insales, including the current year compared to the prior year of approximately $1 million.

Segment earnings increased $22.7 million compared to prior year. The improvement in earnings was primarily driven by prior year costs of approximately $21 million related to Clinton Cards that do not have comparative amounts in the current year period. In the first quarter of the prior year, Clinton Cards, a significant third-party customer at the time, was placed into administration. As a result, we incurred bad debt expense of approximately $17 million and ancontract asset impairment of deferred costs related to the supply agreement associated with the Clinton Cards’ Birthdays stores of approximately $4 million. The prior year also included charges of approximately $3$9 million, due to strategic business actions, including the divestiture of a small non-cardincreased product line and the closure of a small gift wrap manufacturing facility in Italy, which did not recur in the current year. In the current year, the impact on earnings from decreased revenue was substantiallyscrap costs, partially offset by favorable product mix as well as lower supply chain costs and scrap expenses of approximately $7 milliongeneral and $2 million, respectively.administrative costs.

Retail Operations Segment

In the prior year second quarter, we acquired retail stores in the UK that we are operating under the “Clintons” brand. As of February 28, 2014, we were operating 396 stores. Total revenue inof our Retail Operations segment increased approximately $88decreased $23 million which includes approximately $91 million of higher sales lesscompared to the prior year. The decrease was driven by the unfavorable impact fromof foreign exchangecurrency translation of approximately $3$23 million. The revenue increase was due to the timing of the Clinton Cards acquisition, whereby the operating results of the Retail Operations segment for the year ended February 28, 2013 included slightly less than eight months of activity compared to a full twelve months during the current year. During the comparable eight month period in the current year, net sales at stores open one year or more were downhigher by approximately 2.6%1.2% compared to the prior year period. Start-up and transitional costs relatedyear.

Segment loss decreased $12.1 million compared to the actions taken to execute our strategy to stabilizeprior year. The decrease was driven by lower store operating and improveoverhead costs of approximately $9 million, a slightly higher gross margin on flat sales before the profitabilityimpact of foreign currency translation, and the stores acquired totaled $1.3 million and $7.7 million innet favorable impact of foreign exchange translation on the loss of approximately $2 million. The current and prior year respectively. The retail operations are consolidated on a one-month lag corresponding with a fiscal year-endresults include fixed asset impairment charges of February 1 for fiscal 2014.approximately $4.1 million and $3.7 million, respectively.

AG Interactive Segment

Total revenue of our AG Interactive segment decreased $3.4$2.5 million compared to the prior year. The decrease in revenue was driven primarily by lower advertising revenue and lower subscription revenue related toand the dispositionunfavorable impact of a minor photo sharing business in the prior fiscal year. At the endforeign currency translation of 2014 and 2013,approximately $1 million. As of February 29, 2016, AG Interactive had approximately 3.73.4 million online paid subscriptions.subscriptions as compared to approximately 3.5 million at February 28, 2015.

Segment earnings decreased $0.9$2.5 million compared toin the priorcurrent year, primarily due to the prior year gain recognized in connection with the disposition of a minor photo sharing business that did not recur in the current period and severance expense incurred in the current year third quarter. These decreases in earningsdecreased revenue and the unfavorable impact of lower revenue were substantially offset by overall cost savings across most functional areasforeign currency translation of the business.approximately $1 million.

Non-reportable SegmentsSegment

Total revenue from our Non-reportable segment increased $33.8decreased $34.0 million compared to the prior year. This increaseApproximately $20 million of the decrease is related to sales in the prior year of the display fixtures business that was sold at the end of the prior year second quarter, and a decrease in revenue was driven primarily by anof approximately $35$14 million increase from our fixtures business, which obtained and completed a $26 million contractdue to supply fixtures to a large consumer electronics company during the sale of Strawberry Shortcake in March of the current year.

Segment earnings increased $17.9 million comparedCompared to the prior year. About eighty percent of the increaseyear, 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 the higher revenue from the fixtures business. The remaining improvement was from our licensing business primarily due to cost savings initiatives during the current year.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.

Interest expense for the current year increaseddecreased approximately $9$8.8 million, primarily dueattributable to increased borrowingslower debt levels in connection with the Merger.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. In the prior year, corporate

Corporate overhead expense included legal and advisory fees of approximately $7 million related toin the Clinton Cards transaction, an impairment of approximately $8 million related to the senior secured debt of Clinton Cards and higher legal expenses of approximately $8 million primarily related to two class action lawsuits involving corporate-owned life insurance policies. The current year included an adjustmentincludes income of $9.1 million from non-income based tax credits received from the State of Ohio for certain incentive programs made available to the Clinton Cards debt impairment, based on current estimated recovery information providedus in connection with the Clinton Cards bankruptcy administration, which resulted in a gainrelocation of approximately $5 millionour world headquarters within Ohio. See Note 4, “Other Income and higher expenses related to the Going Private Proposal and Merger of approximately $21 million. The current year also included a non-cash impairment of approximately $2 million related to our investment in Schurman and a non-cash loss of approximately $2 million in connection with the freeze to the accrued benefit of the Supplemental Executive Retirement Plan. For the current year, stock-based compensation in the table above includes stock-based compensation prior to the Merger and the impact of the settlement of stock options and the cancellation or modification of outstanding restricted stock units and performance shares concurrent with the Merger, a portion of which is non-cash. There is no stock-based compensation subsequent to the Merger, as these plans were converted into cash compensation plans at the time of the Merger. Refer to Note 2, “Merger,Expense,” to the Consolidated 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 and a loss on disposal related to the sale of our world headquarters location. In conjunction with the sale, we incurred a total non-cash loss on disposal of $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 $20 million less in the current year compared to 2015.

Comparison of the years ended February 28, 20132015 and February 29, 20122014

In 2013,2015, net income was $49.9$65.1 million compared to $57.2$50.5 million in 2012.2014.

Our results for 20132015 and 20122014 are summarized below:

Revenue Overview

During 2013,2015, consolidated net sales were $1.84$1.99 billion, up from $1.66$1.94 billion in 2012.2014. This 10.8%2.3%, or $179.3$44.5 million, increase was primarily related to the purchase of retail stores from Clinton Cards which caused an increase in netdriven by higher sales of approximately $187 million compared to 2012. The increase was comprisedgreeting cards of approximately $243$44 million, of netincreased 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 2013 would have been third-party sales in 2012 to Clinton Cards stores that were not owned by us at that time. In addition, greeting card sales through our wholesale divisions improved approximately $17 million. More than offsetting these increases were reduced gift packaging, party goods and other ancillary product salesproducts of approximately $11$22 million, lower net sales in our fixtures businessthe favorable impact of fewer SBT implementations during the year of approximately $8 million and the favorable impact of foreign currency translation of approximately $4 million. These increases were partially offset by lower sales from our display fixtures business, which was sold during the second quarter of 2015, of approximately $29 million and a $4 millioncontract asset impairment of deferred costs related to the supply agreement associated with the Birthdays stores that were closed as parta customer bankruptcy 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.

The contribution of each major product category as a percentage of net sales for the past two fiscal years 2012 and 2013 was as follows:

Other revenue, primarily royalty revenue from our Strawberry Shortcake and Care Bears properties, decreased $5.7$3.3 million from $31.9$27.9 million during 20122014 to $26.2$24.6 million in 2013.2015.

Wholesale Unit and Pricing Analysis for Greeting Cards

Unit and pricing comparatives (on a sales less returns basis) for 20132015 and 20122014 are summarized below:

During 2013,2015, total wholesale greeting card sales less returns increased 1.3%,5.3% compared to 2012,2014, with a 0.3% improvement in unit volume and a 1.0%3.5% increase in selling prices.prices and a 1.7% increase in unit volume. The overall increase was driven primarily driven by increases in selling prices and unit volume and selling prices from both our everyday and seasonal greeting cards in our North American Social Expression Products segment. Also contributing to the overall increase were increases in selling prices from everyday cards and improvement in unit volume from seasonal cards in the International Social Expression Products segment.

Everyday card sales less returns were up 0.1% in 2013,5.8% compared to 2012,2014, as a result of increasedincreases in selling prices of 0.3% offset by a decline in4.6% and unit volume of 0.3%1.2%. Both theThe increase in selling price increase and unit volume decrease wereprices was driven by our North American Social Expression Products segment. Thegeneral price increases and favorable product mix within the core product line, which more than offset the continued unfavorable shift to a higher proportion of value cards was more than offset by general price increases. These impacts were partially offset by decreases in selling prices andcards. The unit volume improvement within our Internationalwas primarily driven by additional distribution with existing customers in the North American Social Expression Products segment.

Seasonal card sales less returns increased 4.0%4.2%, with unit volume growth of 3.0% and selling price increases of 1.2%. The increase 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, Easter and Graduation programs. This improvement was partially offset by a declineChristmas programs in unit volume related toboth our Easter program.North American Social Expression Products and International Social Expression Products segments. The increase in selling prices was primarily driven by our Father’s Day, Graduation and Christmas programs in our North American Social Expression Products segment across all of our seasonal card programs.segment.

Expense Overview

MLOPC for 20132015 were $817.7$882.3 million, an increase of $76.1$25.1 million from $741.6$857.2 million in 2012.2014. As a percentage of total revenue, these costs were 43.8%43.9% in both 2013 and 2012. The new retail operations we purchased from Clinton Cards caused a net increase in MLOPC of approximately $43 million during 20132015 compared to 2012. This net43.5% in 2014. The increase was comprised of approximately $96 million for cost of goods sold through the new Retail Operations segment, reduced by approximately $53 million for the adjustmentprimarily due to cost of goods related to intersegment sales from the International Social Expression Products segment to the Retail Operations segment. Excluding the impact of higher sales and unfavorable product mix in 2015 as well as the Retail Operations segment, MLOPC increased byunfavorable impact of foreign currency translation of approximately $33$4 million. Of this increase, approximately $28 million was attributable primarily to a combination of higherPartially offsetting these increases were lower product contentdisplay material costs and an unfavorable change in sales mix, including the continued shift toward a higher proportionelimination of value cards while maintaining a relatively consistent net sales level. Also contributingcosts related to the display fixtures business that was sold in the second quarter of 2015.

SDM for 2015 were $696.5 million, an increase of $11.4 million from $685.1 million in MLOPC2014. As a percentage of total revenue, these costs were 34.6% in 2015 compared to 34.8% in 2014. The dollar increase was primarily driven by higher supply chain costs of approximately $3 million, the unfavorable impact of foreign currency translation of approximately $4 million and increased retail store expenses of approximately $10 million, which included approximately $4 million of higher scrap expense and approximately $3 million of higher costs associated with in-store product displays.

SDM for 2013fixed asset impairment charges. Partially offsetting these increases were $653.9 million, increasing from $533.8 million in 2012. The increase of $120.1 million was driven by approximately $126 million of expenses within our new Retail Operations segment. Also contributing to the increase were higherlower sales, marketing and product management expenses of approximately $7$4 million and the elimination of approximately $2 million of costs related to the display fixtures business that was sold in the second quarter of 2015.

Administrative and general expenses for 2015 were $289.4 million, a decrease of $8.0 million from $297.4 million in 2014. 2014 included costs and fees of approximately $28 million related to the Merger (See Note 2, “Merger,” to the Consolidated Financial Statements under Part II, Item 8 of this Annual Report for further information). Also contributing to the decrease were lower costs in the AG Interactive segment of approximately $3 million driven by 2014 cost savings initiatives, the elimination of approximately $2 million of costs related to the display fixtures business that was sold in the second quarter of 2015 and other general cost savings of approximately $3 million. These increasesdecreases were partially offset by lower agency fees related to our licensing business 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 2013.

Administrative and general expenses were $298.6 million in 2013, an increase from $250.7 million in 2012. The increase of $47.9 million was driven partially by approximately $17$22 million of higher bad debt expense recorded in the UK. The increased bad debtvariable compensation expense related to unsecured accounts receivable of Clinton Cards being written off after Clintons was placed into administration during 2013. Expenses within our new Retail Operations segment added approximately $16 million. Transactioncorporate bonus and long-term incentive programs and higher technology costs of approximately $7$6 million.

A non-cash intangible asset impairment charge of $21.9 million relatedwas recorded in 2015, as indicators emerged during the period, fourth quarter holiday results in particular, that led us to the purchaseadjust our future cash flow expectations. As such, as we performed our annual impairment testing of the senior secured debt and the retail store acquisition of Clinton Cards were also recordedindefinite-lived intangible assets during 2013. 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 2012, goodwill impairment charges of $27.2 million were recorded. In the fourth quarter of 2012,2015, we determined that the Clinton Cards tradename was fully impaired.

Other operating income was $23.7 million during 2015 compared to $7.7 million in 2014. The increase was driven primarily by the gain on the sale of our market capitalization significantly declined asdisplay fixtures business of $35.0 million, partially offset by a resultnon-cash loss recorded upon sale of decreasesour current world headquarters location of $15.5 million. In addition, in our stock price. Inboth 2015 and 2014, based on updated estimated recovery information provided in connection with the preparation of our annual financial statements,Clinton Cards bankruptcy administration, we concluded that the decline in the stock price and market capitalization were indicators of potential impairment which required the performance ofrecorded 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 expense was $4.3 million during 2013 compared to income of $8.2 million in 2012. The increase in net expense was primarily attributable to 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 2015 and $4.9 million in 2014. The 2015 recovery represents the prior year included a gainfull recovery of $4.5the impairment. The income related to the impairment recovery in 2015 was partially offset by other expenses of $2.1 million fromrelated to the sale of certain minor characters within our intellectual properties portfolio.Clinton Cards bankruptcy administration.

Interest expense was $17.9$36.0 million during 2013, down2015, up from $53.1$27.4 million in 2012.2014. The decreaseincrease of $35.2$8.6 million was primarily attributable to the debt refinancing that occurred during the fourth quarter of 2012 that did not recur. In conjunctionincreased borrowings in connection with 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 forMerger as well as the write-offimpact of the unamortized discountcredit facility amendment and deferred financing costs associated withterm loan prepayments. In 2015 there were twelve months of interest on these increased borrowings while 2014 included slightly less than seven months. For further information related to our borrowings, see Note 11, “Debt,” to the retiredConsolidated Financial Statements under Part II, Item 8 of this Annual Report.

Interest income was $2.6 million in 2015 compared to $0.4 million in 2014. During 2015, as part of the 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 and a charge of $9.1 million for the consent payment, tender fees, call premiums and other fees associated with the refinancing.Clinton Cards that was previously not expected to be received.

Other non-operating incomeexpense (income) – net was $9.2expense of $0.3 million during 2013in 2015, compared to expense$3.3 million of $0.1 million during 2012. The 2013 results includedincome in 2014. Included in 2014 is a gain of $4.3$3.3 million related to the sale of a portion ofassociated with our investment in the common stock of Party City. The remaining increase was primarily due to a year-over-year change in foreign currency gains and losses of $4.1 million.third party.

The effective tax rate was 41.9%41.2% and 41.5%55.4% during 20132015 and 2012,2014, respectively. The higher than statutory rate in 2015 was primarily due to the surrender of certain corporate-owned life insurance policies that resulted in an increase in tax expense of $28.3 million. The increase was partially offset by the benefit of dual consolidation losses of our branches totaling $13.3 million and the benefit of the net release of valuation allowances of $4.2 million. The higher than statutory tax rate in 20132014 was primarily due to an increase of $12.6 million to the valuation allowance against certain nondeductible expenses incurred as a result ofnet operating loss and foreign tax credit carryforwards that we believed at the Clinton Cards acquisition as well as certain items includable as taxabletime would expire unused and an increase in the state income which did not have corresponding book income amounts also as a result of the Clinton Cards transaction. The higher than statutory tax rate in 2012 was primarilyexpense due to the goodwill impairment charge forreceipt of intercompany foreign dividends. The valuation allowance was recorded in accordance with Internal Revenue Code section 382 and 383 due to the UK Reporting Unit, which was nondeductible.Merger as previously disclosed.

Segment Results

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

North American Social Expression Products Segment

Total revenue of our North American Social Expression Products segment increased $16.7$62.8 million in 2015 compared to 2012.2014. The increase was primarily driven by higher sales in seasonalof greeting cards of approximately $15$40 million, increased sales of gift packaging, party goods and other ancillary products of approximately $28 million and other consumer products such as party goods, stationerythe favorable impact of fewer SBT implementations during the year of approximately $7 million. These favorable items were partially offset by the unfavorable impact of foreign currency translation of approximately $8 million and gift packaginga contract asset impairment related to a customer bankruptcy of approximately $4 million. Partially offsetting these increases were lower sales of everyday greeting cards of approximately $3 million.

Segment earnings increased $10.4$20.7 million in 20132015 compared to 2012.2014. The increase is attributable to a goodwill impairment chargewas driven by the impact of higher revenues which provided approximately $51 million of additional gross margin, including the favorable impact of fewer SBT implementations of approximately $21$6 million. This improvement in earnings was partially offset by a non-cash loss related to the sale of our current world headquarters location, of which approximately $13 million of the total loss of $15.5 million was recorded within the North American Social Expression Products segment, an increase in 2012 that did not recur in 2013 as well lower supply chain costs and lower bad debtvariable compensation expense of approximately $7 million, and $5 million, respectively. The lower supply chain costs, specifically field sales and merchandiser expenses, were primarily driven by 2012 store setup activities for the value channel, which did not recur in 2013. These favorable variances were partially offset by higher marketing and product management expenses of approximately $10 million, increased product relatedtechnology costs of approximately $6 million higher in-store product displayand increased supply chain 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.million.

International Social Expression Products Segment

Total revenue of our International Social Expression Products segment decreased $72.0increased $7.8 million in 2015 compared to 2012.2014. The decreaseincrease was primarily driven primarily by the elimination 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 2012 to Clinton Cards stores that were not owned by us at that time. The remaining decrease of approximately $16 million for 2013 was driven primarily by a combination of lower sales of both gift packaging 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 deferred costs of approximately $4 million related to the supply agreement associated with the Birthdays branded stores that were closed as part of the Clinton Cards administration process. Partially offsetting these decreases were higher sales of everyday greeting cards of approximately $2 million. The sales shortfall resulting from Clinton Cards retail store closings were mostly offset by higher sales to other customers. Foreign$5 million, the favorable impact of fewer SBT implementations during the year of approximately $1 million and the favorable impact of foreign currency translation unfavorably impacted sales byof approximately $3 million for 2013.$2 million.

Segment earnings decreased $33.7$1.8 million in 2015 compared to 2012 due to bad debt expense of approximately $17 million in connection with Clinton Cards being placed into administration and an impairment of deferred2014. Segment earnings were unfavorably impacted by upfront costs of approximately $4 million related to the supply agreement associated with the Birthdays stores that were closed as part of the Clinton Cards administration process. Earnings also decreasedcost savings initiatives and a lower gross margin percentage driven by approximately $17 million for 2013 due to a combination of lower sales volume,seasonal yield rates, an unfavorable mixpricing rate variance 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 goodwill impairment charge of approximately $6 million in 2012 that did not recur in 2013 and lower general and administrative costs of approximately $5 million primarily related to overhead cost savings initiatives.content costs.

Retail Operations Segment

As a resultTotal revenue 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 theour Retail Operations segment for 2013 included only eight monthsincreased $4.8 million in 2015 compared to 2014. The increase was driven by the impact of activity, beginning June 6, 2012, the datefavorable foreign exchange translation of acquisition.approximately $10 million. During 2015, net sales at stores open one year or more were down approximately 2.4% compared to 2014.

Segment earnings decreased $30.4 million in 2015 compared to 2014. The lower segment earnings were the result of $6.6 million in 2013 included start-uplower sales (excluding the impact of foreign exchange translation), lower gross margins and transitionalhigher store operating costs, as well as fixed asset impairment charges of $7.7 million related toapproximately $4 million. The lower gross margins were the actions taken to execute our strategy to stabilizeresult of increased promotional pricing activities and improve the profitabilityincreased inventory shrink expense. The majority of the stores acquired.higher store operating costs was the result of new store openings. While we were disappointed with 2015’s operating results, we continue to adjust our strategies to better position ourselves within the very competitive UK retail environment and we remain committed to achieving the multi-year turnaround of the business.

AG Interactive Segment

Total revenue of our AG Interactive segment decreased $4.1$2.1 million in 2015 compared to 2012.2014. The decrease in revenue was driven primarily driven by lower revenue from advertising. Atsubscription revenue. As of February 28, 2013,2015, AG Interactive had approximately 3.73.5 million online paid subscriptions as of February 28, 2013 as compared to approximately 3.83.7 million at February 29, 2012.28, 2014.

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

Non-reportable Segment

Total revenue from our Non-reportable segment decreased $32.0 million in 2015 compared to 2014. Approximately $29 million of the decrease is related to the display fixtures business that was sold at the end of the second quarter of 2015. In addition, during the first half of 2015, when we owned the display fixtures business, revenue was substantially lower than 2014 due to a contract to supply fixtures to a large consumer electronics company that did not recur in 2015.

Segment earnings for 2013 increased $2.5decreased $14.7 million in 2015 compared to 2012. The impact of decreased sales administration, product management and marketing costs is partially offset2014. This decrease was primarily driven by the impact ofdisplay fixtures business, due to lower sales volume, unfavorable product mix and higher technology costs.operating costs during the first half of 2015. As noted above, the fixtures business was sold in the second quarter of 2015.

Unallocated Items

Centrally incurred and managed costs are not allocated back to the operating segments. The unallocated items include interest expense for centrally-incurred debt, domestic profit-sharing and 401(k) match expense and stock-based compensation expense. Unallocated items also 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 2015 increased approximately $15$9 million, for certain charges associatedprimarily due to increased borrowings in connection with the activities and transactions related to the Clinton Cards acquisition, approximately $7 million related to the Going Private ProposalMerger as well as the impact of the credit facility amendment and term loan prepayments. In 2015 there are twelve months of interest on these increased borrowings while 2014 included slightly less than seven months. For further information, refer to the discussion of our borrowing arrangements as disclosed in Note 11, “Debt,” to the Consolidated Financial Statements under Part II, Item 8 of this Annual Report.

Stock-based compensation expense in 2014 includes approximately $9$4 million of higher legal expenses. Partially offsettingnon-cash stock-based compensation prior to closing of the Merger and the impact of the settlement of stock options and the cancellation or modification of outstanding restricted stock units and performance shares concurrent with the closing of the Merger, a portion of which was non-cash. There is no stock-based compensation subsequent to the closing of the Merger as these increases wasplans were converted into cash compensation plans. Expense related to these plans is included in corporate overhead expense for 2015.

Corporate overhead expense in 2015 includes the gain on sale of our display fixtures business of $35.0 million and a gain of $4.3 millionloss on disposal related to the sale of Party City common stock. In 2012, unallocated items includedour world headquarters. During 2015, we sold our world headquarters location and incurred a total non-cash loss on extinguishmentdisposal of debt$15.5 million, of which $2.2 million was recorded within the Unallocated segment. See Note 3, “Acquisitions and Dispositions,” to the Consolidated Financial Statements under Part II, Item 8 of this Annual Report for further information. A non-cash intangible asset impairment charge of $21.9 million was recorded in 2015, as indicators emerged during the period, fourth quarter holiday results in particular, that led us to adjust our future cash flow expectations. As such, as we performed our annual impairment testing of indefinite-lived intangible assets during the fourth quarter of 2015, we determined that the Clinton Cards tradename was fully impaired. In 2015 there is also approximately $31$19 million of higher variable compensation expense compared to 2014. Corporate overhead expense in 2014 included costs related to the Merger of $17.5 million. See Note 2, “Merger,” to the Consolidated Financial Statements under Part II, Item 8 of this Annual Report for further information.

Liquidity and Capital Resources

Operating Activities

During the year, cash flow from operating activities provided cash of $160.1$127.4 million compared to $162.8$130.4 million in 2013,2015, a decrease of $2.7$3.0 million. Cash flow from operating activities for 20132015 compared to 2012 resulted in an increase of $39.02014 decreased by $29.7 million from $123.8$160.1 million in 2012.2014.

Accounts receivable, net of the effect of acquisitions and dispositions, was a source of cash of $8.4$4.0 million in 20142016 compared to a use of cash of $9.8$13.2 million in 20132015 and a source of cash of $4.5$8.4 million in 2012.2014. As a percentage of the prior twelve months’ net sales for the years then ended, net accounts receivable was 5.0% and 5.2% at February 28, 2014 compared to 5.7% at29, 2016 and February 28, 2013.2015, respectively. The year-over-year fluctuations occurred primarily within our North American Social Expression Products and International Social Expression Products segments areand were primarily due to the timing of collections from, or credits issued to, certain customers occurring in a different pattern in the current period compared to the prior periods.

Inventories, net of the effect of acquisitions and dispositions, were a usesource of cash of $6.8$12.4 million in 20142016 compared to a use of cash of $31.6 million in 2013 and a use of cash of $23.3 million in 2012. The useuses of cash in 2015 and 2014 of $20.3 million and $6.8 million, respectively. The source of cash in 2016 was primarily due to our Retail Operations segmentthe result of an inventory efficiency initiative that grew inventory by approximately $13 million. This was partially offset by lowerreduced warehouse inventory levels within our North American Social Expression Products segment. In 2013,2015, the use of cash was primarily due to our International Social Expressions and Retail Operations segments that grew inventory by approximately $8 million and $5 million, respectively. In addition, inventory increased within our display fixtures business by approximately $8 million prior to the sale of that business in the second quarter of 2015. In 2014, the use of cash was driven primarily by our Retail Operations segment that grew inventory by approximately $27$13 million, from its acquisition in June 2012 to February 2013. The use of cash in 2012 was primarily due to thepartially offset by lower inventory build of cards associated with expanded distribution.

Other current assets, net of the effect of acquisitions and dispositions, were a source of cash of $15.7 million during 2014, compared to a use of cash of $23.4 million in 2013 and a source of cash of $7.0 million in 2012. The source of cash in 2014 was primarily due to lower prepaid rents within our Retail Operations segment and lower prepaid insurancelevels within our North American Social ExpressionsExpression Products segment. The use of cash in 2013 was driven primarily by prepaid rents within our new Retail Operations segment that was not present in prior years. The source of cash in 2012 was primarily due to the use of trust assets to pay medical claim expenses as we terminated the active employees’ medical trust fund as of February 29, 2012.

Deferred costs – net generally represents payments under agreements with retailers net of the related amortization of those payments. During 2014, payments exceeded amortization by $22.2 million. During 2013,2016, amortization exceeded payments by $27.1$12.9 million. In 2012, paymentsPayments exceeded amortization in 2015 and 2014 by $31.3 million.$10.1 million and $22.2 million, respectively. See Note 10, “Deferred Costs,” to the Consolidated Financial Statements under Part II, Item 8 of this Annual Report for further detail of deferred costs related to customer agreements.

Accounts payable and other liabilities, net of the effect of acquisitions and dispositions, were a use of cash of $41.3 million in 2016, compared to a source of cash of $45.4 million in 2015 and a source of cash of $2.0 million in 2014,2014. The change in cash usage from a source in 2015 to a use in 2016 was attributable to higher annual and long-term variable compensation payments during the current year compared to sourcethe same period in the prior year, an increase in accounts payable payments in our North American Social Expression Products segment due to normal year-over-year timing of cashbusiness transactions, and lower accounts payable balance in our International Social Expression Products segment as a result of $58.6 millionthe cessation of manufacturing operations in 2013 and use of cash of $13.6 million in 2012.the current year. The 20132015 growth in accounts payable and other liabilities compared to 2014, and thus an increase in cash flow, in that fiscal year, was primarilypartially due to increased accruals related to our new Retail Operations segmentannual and long-term variable compensation programs, as well as activitiesnormal year-over-year timing of business transactions and related to our information technology systems refresh project and other strategic projects.payments.

Investing Activities

Investing activities usedprovided cash of $38.2 million compared to using cash of $16.7 million and $32.7 million of cash in 2015 and 2014, compared to $163.2 million of cash used in 2013 and $70.3 million of cash used in 2012.respectively. The use of cash in the current year was primarily drivenincludes proceeds of $105.0 received from the sale of Strawberry Shortcake and proceeds of $24.1 million received from the surrender of certain corporate-owned life insurance policies. These cash inflows were partially offset by $54.1 million of cash paid for capital expenditures.expenditures of $86.0 million, cash paid for acquired character property rights of $2.8 million, and a payment of $3.2 million related to the final working capital adjustments made in connection with the sale of our display fixtures business.

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

of certain corporate-owned life insurance policies. Partially offsetting these cash inflows were cash payments of $91.2 million and $37.7 million for capital expenditures and acquired character property rights, respectively. The decreaseincrease in capital expenditures compared to 20132014 related primarily to increased investments within our Retail Operations segment, the purchase of a decreasenew building in assets acquired in connection withthe UK within our information technology systems refresh projectInternational Social Expression Products segment and machinery and equipment purchasedthe land related to our new world headquarters.

The use of cash during 2014 was primarily driven by cash payments of $54.1 million for our card-producing facilities. The current year also includedcapital expenditures, partially offset by the receipt of a cash distribution of $12.1 million related to our investment in Party Citya third party and proceeds of $7.6 million received from the Clinton Cards bankruptcy administration.

The use of cash during 2013 was primarily related to cash outlays of $114.1 million associated with capital expenditures. The increase in capital expenditures for 2013 compared to 2012 related primarily to assets acquired in connection with our information technology systems refresh project and investments in our new Retail Operations segment. In addition, during the first quarter of 2013 we paid $56.6 million of cash to acquire all of the outstanding senior secured debt of Clinton Cards.

The use of cash during 2012 was primarily related to cash payments for capital expenditures of $78.2 million as well as business acquisitions of $5.9 million. Capital expenditures in 2012 related primarily to assets acquired in connection with our information technology systems refresh project and our new world headquarters project, as well as machinery and equipment purchased for our card-producing facilities. During 2012, cash paid for the Watermark acquisition, net of cash acquired, was $5.9 million. Partially offsetting these uses of cash in 2012 were cash receipts of $6.0 million from the sale of the land and building related to our DesignWare party goods product lines in our North American Social Expression Products segment, $4.5 million from the sale of certain minor characters in our intellectual properties portfolio and approximately $2.4 million from the sale of the land, building and certain equipment associated with a distribution facility in our International Social Expression Products segment.

Financing Activities

Financing activities used $153.0$103.9 million of cash during 20142016 compared to $42.0$129.3 million in 20132015 and $136.9$153.0 million in 2012.2014. The primary use of cash in each of the current and prior year was in connection with activities related to scheduled quarterly payments and voluntary prepayments on the term loan, which totaled $65.0 million and $90.0 million in 2016 and 2015, respectively. In addition, we paid cash dividends of $34.6 million in 2016 and $38.1 million during 2015.

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

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

The 2012 use of cash primarily related to the tender offers and redemption of our 7.375% senior notes due 2016 of $222.0 million, our 7.375% notes due 2016 of $32.7 million and a charge of $9.1 million for the consent payments, tender fees, call premium and other fees associated with these transactions. Share repurchases and dividend payments also contributed to the use of the cash in 2012. We paid $72.4 million to repurchase approximately 4.4 million Class A common shares under our repurchase program and $10.1 million to purchase approximately 0.4 million Class B common shares in accordance with our Amended and Restated Articles of Incorporation. Repurchases of $2.2 million for approximately 0.1 million Class A common shares initiated at the end of 2012 were not included in the above repurchase amount in the Consolidated Statement of Cash Flows because the cash settlement for these transactions did not occur until 2013. However, this $2.2 million was included in the shares repurchased amount within our Consolidated Statement of Shareholders’ Equity under Part II, Item 8 of this Annual Report. In addition, we paid cash dividends of $23.9 million during 2012. Partially offsetting these uses of cash was a cash receipt of $225.0 million from the issuance of the 7.375% senior notes due 2021. Also, proceeds from the exercise of stock options and tax benefits from share-based payment awards provided $13.6 million of cash during 2012.

Credit Sources

Substantial credit sources are available to us. In total, we had available sources of credit of approximately $640$485 million at February 28, 2014,29, 2016, which included $340$185 million outstanding on our term loan facility, a $250 million revolving credit facility and a $50 million accounts receivable securitization facility, of which $267.8$273.5 million in the aggregate was unused as of February 28, 2014.29, 2016. Borrowings under the accounts receivable securitization facility are limited based on our eligible receivables outstanding. The term

loan facility was fully drawn on August 9, 2013, the closing date of the Merger. At February 28, 2014, we had $4.5 million of borrowings outstanding under our revolving credit facility and29, 2016, we had no borrowings outstanding under the revolving credit facility or the accounts receivable securitization facility. We had, in the aggregate, $27.7$26.5 million outstanding under letters of credit, which reduced the total credit availability thereunder as of February 28, 2014.29, 2016.

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

Credit FacilityFacilities

In connection with the closing of the Merger, on August 9, 2013, we entered into a $600 million secured credit agreement (“Credit Agreement”), which provides for a $350 million term loan facility (“Term Loan Facility”) and a $250 million revolving credit facility (“Revolving Credit Facility” and, together with the Term Loan Facility, the “Credit Facilities”). The Term Loan Facility was fully drawn on August 9, 2013, the effective date of the Merger.Merger (“Merger Date”). We issued the Term Loan Facility at a discount of $10.8 million. Installment payments are being made on theThe Term Loan Facility beginning with an installment payment of $10 million made in February, 2014. Futurerequires us to make quarterly payments are scheduled to be made quarterly in the amount of $5 million through May 31, 2019. A2019 and a final payment of $235 million will be due on August 9, 2019. Voluntary prepayments without penalty or premium are permitted. During 2016 and 2015 we made voluntary prepayments of $65 million and $75 million, respectively, on the Term Loan Facility, thereby eliminating all future payments prior to this facility’s due date in 2020. We may elect to increase the commitments under each of the Term Loan Facility and the Revolving Credit Facility up to an aggregate amount of $150 million. The proceeds of the term loans and the revolving loans borrowed on the Merger Date were used to fund a portion of the Merger consideration and pay fees and expenses associated therewith. After the Merger Date, revolvingRevolving loans borrowed under the Credit Agreement after the Merger Date were used for working capital and general corporate purposes.

On January 24, 2014, we amended the Credit Agreement. The amendment modifies the Credit Agreement to among other things, permit us to: (i) convertspecified corporate elections and tax distributions associated with a conversion from a “C corporation” to an “S corporation” for U.S.

federal income tax purposes, (the “S-Corp Conversion”), (ii) in connection with the S-Corp Conversion, (x) change our fiscal year to end on December 31 of each year, (y) change our inventory accounting method from last-in, first-out to first-in, first-out and (z) make S-Corp tax distributions (as defined in the amended Credit Agreement) to the holders of our capital stock while we are treated as an S corporation or disregarded entity of an S corporation, (iii) make restricted payments (as defined in the Credit Agreement) to enable the payment of current interest on certain senior unsecured notes issued by an indirect parent company of ours in a principal amount not to exceed $300 million, (iv) make a one-time restricted payment of up to $50 million to Parent so long asand recurring restricted payments to enable the payment of current interest on or about the date of such restricted payment Parent redeemsPIK Notes (as defined in the non-voting preferred stock of Parent held by Koch Investment in an amount of not less than such restricted payment, (v)“Capital Deployment and Investments” section below), and (iii) to make certain additional capital expenditures each year primarily related to the our information systems refresh projectproject. The Credit Agreement was further amended on September 5, 2014. This amendment modified the Credit Agreement to among other things (i) reduce the interest rates applicable to the term loan and (vi) make changesrevolving loans, (ii) eliminate the London Interbank Offered Rate (“LIBOR”) floor interest rate used in the determination of interest charged on Eurodollar revolving loans, (iii) reduce the commitment fee applicable to certain definitions to excludeunused revolving commitments and (iv) reset the accounting treatmentusage term of the future lease that may be entered intogeneral restricted payment basket with effect from September 5, 2014. As a result of this amendment, certain changes in connection with the new world headquarters.syndicated lending group and the voluntary prepayments made on the term loan facility, we expensed $2.8 million of unamortized financing fees and issuance costs in 2015. An additional $1.9 million was expensed in the current year as a result of the voluntary prepayments.

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

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

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

Accounts Receivable Facility

We are also a party to an accounts receivable facility that provides funding of up to $50 million, under which there were no borrowings outstanding as of February 29, 2016 and February 28, 2014 and 2013.2015.

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

On August 9, 2013, we amended ourThe accounts receivable facility. The amendment modifiedfacility has a scheduled termination date of July 27, 2016 and then must be renewed annually thereafter. Borrowings on the accounts receivable facility by providing for a scheduled termination date that is 364 days followingtypically bear interest based on the date of the amendment, subject to two additional, consecutive 364-day terms with the consent of the parties thereto. The amendment also, among other things, permitted the Merger and changed the definition of the base rate to equal the higher of the prime rate as announced by the applicable purchaser financial institution, and the federal funds rateone-month LIBOR plus 0.50%.40 basis points.

AGC Funding Corporation also pays an annual facility fee of 8060 basis points on the commitment of the accounts receivable securitization facility together withand customary administrative fees on letters of credit that have been issued and on outstanding amounts funded under the facility.issued. Funding under the facility may be used for working capital, general corporate purposes and the issuance of letters of credit.

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

7.375% Senior Notes Due 2021

On November 30, 2011, we closed a public offering of $225 million aggregate principal amount of 7.375% senior notes due 2021 (the “2021 Senior Notes”). The net proceeds from this offering were used to redeem other existing debt. In connection with this transaction, we wrote off the remaining unamortized discount and deferred financing costs related to the previously existing debt, totaling $21.7 million, as well as recorded a charge of $9.1 million for the consent payments, tender fees, call premium and other fees incurred in connection with these transactions.

The 2021 Senior Notes will mature on December 1, 2021 and bear interest at a fixed rate of 7.375% per year. The 2021 Senior Notes constitute our general unsecured senior obligations. The 2021 Senior Notes rank senior in right

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

At February 28, 2014, the Corporation was29, 2016, we were in compliance with the financial covenants under itsour borrowing agreements described above.

Capital Deployment and Investments

In connection with the Merger, Parent issued approximately $245 million in aggregate stated value of non-voting preferred stock. Parent could elect to either accrue or pay cash for dividends on the preferred stock. The preferred stock carried a cash dividend rate of LIBOR plus 11.5%. We provided Parent with the cash flow for Parent to pay dividends on the preferred stock. During the post-merger period of 2014, we made cash dividend payments of $75.4 million to Parent of which $11.4 million was used for the payment of dividends on the preferred stock. On February 10, 2014, the preferred stock was fully redeemed by Parent.

Also on February 10, 2014, in connection with the redemption of the preferred stock, Century Intermediate Holding Company 2 (“CIHC2”), an indirect parent of American Greetings, issued $285 million aggregate principal amount of 9.75%9.750%/10.50%10.500% Senior PIK

Toggle Notes due 2019 (the “PIK Notes”). Excluding the first and last interest payment periods, which must be paid in cash, CIHC2 may elect to either accrue or pay cash interest on the PIK Notes. The PIK Notes carry a cash interest rate of 9.75%9.750%. Prior to the payment of interest by CIHC2, it is expected that we will provide CIHC2 with the cash flow for CHIC2CIHC2 to pay interest on the PIK Notes. Assuming interest is paid regularly in cash, rather than accrued, the annual cash required to pay the interest is expected to be approximately $27.8 million while the entire issuance of PIK Notes are outstanding. For further information, refer to the discussion of the PIK Notes as disclosed in “Transactions with Parent Companies and Other Affiliated Companies” in Note 18, “Related Party Information,” to the Consolidated Financial Statements under Part II, Item 188 of this Annual Report.Report on Form 10-K.

Throughout fiscal 20142017 and thereafter, we will continue to consider all options for capital deployment including growth opportunities, acquisitions and other investments in third parties, expanding customer relationships, expenditures or investments related to our current product leadership initiatives or other future strategic initiatives, capital expenditures, the information technology systems refresh project, paying down debt, paying dividends and, as appropriate, preserving cash. Our future operating cash flow and borrowing availability under our credit agreement and our accounts receivable securitization facility are expected to meet these and other currently anticipated funding requirements. The seasonal nature of our business results in peak working capital requirements that may be financed through short-term borrowings when cash on hand is insufficient.

Over roughly the next five or sixseveral years we expect to allocate resources, including capital, to refresh our information technology systems by modernizing our systems, redesigning and deploying new processes, and evolving new organization structures, all of which are intended to drive efficiencies within the business and add new capabilities. Amounts that we spend could be material in any fiscal year and over the life of the project. The total amount spent through fiscal 2013 on this project was approximately $84 million. During 2014,2016, we spent approximately $25$53 million, including capital of approximately $21$43 million and expense of approximately $4$10 million, on these information technology systems. We currentlyhave recently completed the blueprint phase of the next segment of the project, and in doing so, determined that due to the unique nature of our business processes and the intricacies of integrating the new systems with our legacy systems, the complexity of the project is greater than originally expected. As a result, the scope and overall cost of this segment of the project has substantially increased when compared to earlier expectations. Based on the current scope of the project, we presently expect to spend a total of at least an additional $150$195 million on these information technology systems, over the remaining life of the project, the majority of which we expect will be capital expenditures. We believe these investments are important to our business, help us drive further efficiencies and add new capabilities; however, there can be no assurance that we will not spend more or less than $150$195 million, over the remaining life of the project, or that we will achieve the anticipated efficiencies or any cost savings.

Our future operating cash flow and borrowing availability under our credit agreement and our accounts receivable securitization facility are expected to meet currently anticipated funding requirements. The seasonal nature of our business results in peak working capital requirements that may be financed through short-term borrowings when cash on hand is insufficient.

Contractual Obligations

The following table presents our contractual obligations and commitments to make future payments as of February 28, 2014:29, 2016: