The current period net expense impacted the Corporation’s reportable segments as follows:

Note 2 – Seasonal Nature of Business

A significant portion of the Corporation’s business is seasonal in nature. Therefore, the results of operations for interim periods are not necessarily indicative of the results for the fiscal year taken as a whole.

Note 3 – Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (the “FASB”) issued SFAS No. 157 (“SFAS 157”), “Fair Value Measurements,” which provides a definition of fair value, establishes a framework for measuring fair value and requires expanded disclosures about fair value measurements. In November 2007, the FASB deferred the effective date of SFAS 157 for non-financial assets and liabilities until fiscal years and interim periods beginning after November 15, 2008. SFAS 157 is still effective for the Corporation in fiscal 2009 for financial assets and liabilities. The Corporation adopted SFAS 157 for financial assets and liabilities on March 1, 2008. In October 2008, the FASB issued FASB Staff Position FAS 157-3 (“FSP 157-3”), “Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active,” which clarifies the application of SFAS 157 when the market for a financial asset is not active and provides an example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial asset is not active. FSP 157-3 became effective upon issuance, including prior periods for which financial statements have not been issued. See Note 12.13.

In February 2007, the FASB issued SFAS No. 159 (“SFAS 159”), “The Fair Value Option for Financial Assets and Financial Liabilities.” SFAS 159 allows companies to choose to measure financial instruments and certain other financial assets and financial liabilities at fair value. SFAS 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The Corporation adopted SFAS 159 on March 1, 2008 and elected not to measure any additional financial instruments or other items at fair value.

In April 2008, the FASB issued FASB Staff Position FAS 142-3 (“FSP 142-3”), “Determination of the Useful Life of Intangible Assets.” FSP 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142 (“SFAS 142”), “Goodwill and Other Intangible Assets.” The intent of FSP 142-3 is to improve the consistency between the useful life of a recognized intangible asset under SFAS 142 and the period of expected cash flows used to measure the fair value of the asset under other U.S. generally accepted accounting principles (“GAAP”). FSP 142-3 is effective for

financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early adoption is prohibited. The guidance for determining the useful life of a recognized intangible asset shall be applied prospectively to intangible assets acquired after the effective date. Certain disclosure requirements shall be applied prospectively to all intangible assets recognized as of, and subsequent to, the effective date.

In May 2008, the FASB issued SFAS No. 162 (“SFAS 162”), “The Hierarchy of Generally Accepted Accounting Principles.” The new standard is intended to improve financial reporting by identifying a consistent framework for selecting accounting principles to be used in preparing financial statements that are presented in conformity with U.S. GAAP for nongovernmental entities. SFAS 162 is effective 60 days following the Securities and Exchange Commission’s approval of the Public Company Accounting Oversight Board’s related amendments to remove the GAAP hierarchy from auditing standards, where it has previously resided. The Corporation does not expect the adoption of SFAS 162 to have a significant impact on its consolidated financial statements.

Note 4 – Other Income and Expense

Approximately 6.2“Miscellaneous” includes, among other things, gains and losses on fixed asset disposals.

Note 5 – (Loss) Earnings Per Share

The following table sets forth the computation of (loss) earnings per share and (loss) earnings per share – assuming dilution:

For the three and nine month periods ended November 28, 2008, all options outstanding (totaling approximately 6.8 million) were excluded from the computation of earnings per share-assuming dilution, as the effect would have been antidilutive due to the net loss in the period. Had the Corporation reported income for the respective periods, approximately 6.5 million and 5.96.0 million stock options outstanding in the three and sixnine month periods ended August 29,November 28, 2008, respectively, werewould have been excluded from the computation of earnings per share–assumingshare-assuming dilution because the options’ exercise prices were greater than the average market price of the common shares during the respective

periods (1.2 periods. Approximately 1.3 million and 1.91.7 million stock options outstanding in the three and sixnine month periods ended August 24,November 23, 2007, respectively).respectively, were excluded from the computation of earnings per share-assuming dilution because the options’ exercise prices were greater than the average market price of the common shares during the respective periods.

Note 6 – Comprehensive (Loss) Income

The Corporation’s total comprehensive (loss) income is as follows:

Note 7 – Trade Accounts Receivable, Net

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

Note 8 – Inventories

The valuation of inventory under the Last-In, First-Out (LIFO) method is made at the end of each fiscal year based on inventory levels and costs at that time. Accordingly, interim LIFO calculations, by necessity, are based on estimates of expected fiscal year-end inventory levels and costs and are subject to final fiscal year-end LIFO inventory calculations.

Inventory held on location for retailers with scan-based trading arrangements totaled approximately $33$45 million, $32 million and $25$36 million as of August 29,November 28, 2008, February 29, 2008 and August 24,November 23, 2007, respectively.

Note 9 – Goodwill and Other Intangible Assets

In accordance with SFAS 142, the Corporation is required to evaluate the carrying value of its goodwill for potential impairment on an annual basis or an interim basis if there are indicators of potential impairment. Due to the recent deterioration in the global economic environment and resulting significant decrease in the Corporation’s market capitalization, combined with significant decreases in reported market values of comparable, unrelated companies, indicators emerged within the AG Interactive segment, which is also the reporting unit for SFAS 142 purposes, and one reporting unit located in the United Kingdom within the International Social Expression Products segment (the “UK Reporting Unit”) that led the Corporation to conclude that a SFAS 142 impairment test was required to be performed during the third quarter for goodwill in these reporting units.

Within the AG Interactive segment, there were the following three primary indicators: (1) a substantial decline in advertising revenues; (2) the e-commerce businesses not growing as anticipated; and (3) the Corporation’s belief that the segment’s current long-term cash flow forecasts may now be unattainable based on the lengthening and deepening economic deterioration.

The following three primary indicators emerged within the UK Reporting Unit: (1) the recent bankruptcy of a major customer; (2) a major customer implementing buying freezes, including on the Corporation’s everyday products; and (3) the Corporation’s belief that current long-term cash flow forecasts may now be unattainable based on the lengthening and deepening economic deterioration.

Under SFAS 142, the test for, and measurement of, impairment of goodwill consists of two steps. In the first step, the initial test for potential impairment, the Corporation compares the fair value of each reporting unit to its carrying amount. Fair values were determined using a combination of an income approach and a market based approach. Based on this evaluation, it was determined that the fair values of the AG Interactive segment and UK Reporting Unit were less than their carrying values, thus indicating potential impairment. In the second step, the measurement of the impairment, the Corporation hypothetically applies purchase accounting to the reporting units using the fair values from the first step. Due to the timing and complexity of step two, the Corporation has yet to complete this step. However, based upon preliminary calculations, the Corporation recorded estimated goodwill charges of $150.2 million, which includes all the goodwill for the AG Interactive segment and $82.1 million, which includes the majority of the goodwill for the UK Reporting Unit. The Corporation expects to finalize the goodwill impairment analysis and record any adjustments to the preliminary charges during the fourth quarter of 2009.

A summary of the changes in the carrying amount of the Corporation’s goodwill during the nine months ended November 28, 2008, by segment, is as follows:

The Corporation also tested the intangible assets of these two businesses during the third quarter in accordance with SFAS 144. Based on this testing, the Corporation recorded an impairment charge of $10.6 million in the AG Interactive segment.

At November 28, 2008, intangible assets subject to the amortization provisions of SFAS 142, net of accumulated amortization and impairment charges, were $6.6 million.

The following table presents information about other intangible assets, which are included in “Other assets” on the Consolidated Statement of Financial Position:

Amortization expense for intangible assets totaled $5.4 million for the nine months ended November 28, 2008. Estimated annual amortization expense for the next five years will approximate $2.1 million in 2010, $1.1 million in 2011, $1.0 million in 2012, $0.9 million in 2013 and $0.7 million in 2014. The weighted average remaining amortization period is approximately 3 years.

Note 10 – Deferred Costs

Deferred costs and future payment commitments are included in the following financial statement captions:

The Corporation maintains an allowance for deferred costs related to supply agreements of $27.7 million, $29.7 million and $24.6 million at November 28, 2008, February 29, 2008 and November 23, 2007, respectively. This allowance is included in “Other assets” in the Consolidated Statement of Financial Position.

Note 1011 – Debt

The Corporation is party to an amended and restated $450 million secured credit agreement and to an amended and restated receivables purchase agreement that had available financing of up to $150 million. The credit agreement includes a $350 million revolving credit facility and a $100 million delay draw term loan. The agreements were each amended on March 28, 2008. The amendment to the credit agreement extends the period during which the Corporation may borrow on the term loan until April 3, 2009 and changes the start of the amortization period from April 4, 2008 until April 3, 2009. The amendment to the accounts receivable facility decreases the amount of available financing from $150 million to $90 million. The revolving credit facility will mature on April 4, 2011 and any outstanding term loans will mature on April 4, 2013. The accounts receivable facility expires on October 23, 2009.

On September 23, 2008, the credit agreement was further amended as follows: (1) to permit the Corporation to sell its Strawberry Shortcake, Care Bears and Sushi Pack properties; (2) to increase the permitted level of acquisitions that the Corporation may make from $200 million to $325 million; (3) to authorize the Corporation to further amend its accounts receivable facility to allow its accounts receivable subsidiary, AGC Funding Corporation, to enter into insurance and other transactions that may mitigate credit risks associated with the collection of accounts receivable; and (4) to permit the Corporation to grant certain liens to third parties engaged in connection with the production, marketing and exploitation of the Corporation’s entertainment properties.

Debt due within one year is as follows:

At August 29,November 28, 2008, the balances outstanding on both the revolving credit facility and accounts receivable securitization facility bear interest at a rate of approximately 3.0%.3.4% and 3.7%, respectively. In addition to the balances outstanding under the aforementioned agreements, the Corporation has, in the aggregate, $25.7 million outstanding under letters of credit, which reduces the total credit availability thereunder.

The 6.10% senior notes could be put back to the Corporation on August 1, 2008, at the option of the holders, at 100% of the principal amount provided the holders exercised this option between July 1, 2008 and August 1, 2008. During the second quarter of 2009, $22.5 million of these notes were repaid upon exercise of the put option. The balance of the 6.10% senior notes was reclassified to long-term.

Long-term debt and their related calendar year due dates are as follows:

At August 29,November 28, 2008, the Corporation was in compliance with the financial covenants under its borrowing agreements.

Note 1112 – Retirement Benefits

The components of periodic benefit cost for the Corporation’s defined benefit pension and postretirement benefit plans are as follows:

The Corporation has a non-contributory profit-sharing plan with a contributory 401(k) provision covering most of its United States employees. The profit-sharing plan expense for the six months ended August 29, 2008 was $0.5 million, compared to $3.5 million in the prior year period. The profit-sharing plan expense for the sixnine month periods are estimates as actual contributions to the profit-sharing plan are made after fiscal year-end. TheIn addition, the Corporation matches a portion of 401(k) employee contributions contingent upon meeting specified annual operating results goals. As of November 28, 2008, the Corporation does not expect to meet the required 2009 operating results goals necessary to make profit-sharing or 401(k) matching contributions. As a result, no expense has been recorded during the nine months ended November 28, 2008 for either profit-sharing or 401(k) matching contributions. The profit-sharing plan expense for the nine months ended November 23, 2007 was $5.1 million. The 401(k) matching contribution expenses recognized for the three and sixnine month periods ended August 29, 2008 were $1.1November 23, 2007 was $1.0 million and $2.9$3.2 million, ($1.0 million and $2.2 million for the three and six month periods ended August 24, 2007), respectively.

At August 29,November 28, 2008, February 29, 2008 and August 24,November 23, 2007, the liability for postretirement benefits other than pensions was $66.8$70.7 million, $63.0 million and $70.3$72.7 million, respectively, and is included in “Other liabilities” on the Consolidated Statement of Financial Position.

Note 1213 – Fair Value Measurements

SFAS 157 outlines a valuation framework, which requires use of the market approach, income approach and/or cost approach when measuring fair value and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. SFAS 157 also expands disclosure requirements to include the methods and assumptions used to measure fair value.

The hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The classification of fair value measurements within the hierarchy is based upon the lowest level of input that is significant to the measurement. The three levels are defined as follows:

The following table summarizes the financial assets measured at fair value on a recurring basis as of the measurement date, August 29,November 28, 2008, and the basis for that measurement, by level within the fair value hierarchy:

During the second quarter of 2009, the Corporation paid approximately $44$44.2 million to acquire, at a substantial discount, debt securities of a company that is currently seeking to restructure its balance sheet.Recycled Paper Greetings, Inc. (“Recycled Paper”). The cash paid for this investment is included in “Other-net” investing activities on the Consolidated Statement of Cash Flows. TheFor the second quarter, the Corporation valuesvalued these debt securities, which are classified as available-for-sale and included in “Other assets” on

the Consolidated Statement of Financial Position, using Level 2 inputs, primarily the most recent transaction price. For the third quarter, the Corporation valued these securities using Level 3 inputs since there was no longer an active, observable market for these securities. The value of these securities takes into consideration many factors that management believes a market participant would consider, including the credit quality of the issuer, current offers by the parties to the issuer’s debt restructuring negotiation, the Corporation’s expected cash flow analysis and input from a broker-dealer in these types of securities. See Note 17 for further information.

The fair value of the mutual fund assets in the deferred compensation plan was considered a Level 1 valuation as it is based on each fund’s quoted market value per share in an active market. Although the Corporation is under no obligation to fund employees’ nonqualified accounts, the fair value of the related non-qualified deferred compensation liability is based on the fair value of the mutual fund assets.

Note 1314 – Income Taxes

The Corporation’s provision for income taxes in interim periods is computed by applying its estimated annual effective tax rate against income from continuing operations before income tax expense for the period. In addition, non-recurring or discrete items are recorded during the period in which they occur. The effective tax rates were 2.9%15.5% and 27.6%14.2% for the three and sixnine months ended August 29,November 28, 2008, respectively, and 33.3%34.0% and 42.4%39.1% for the three and sixnine months ended August 24,November 23, 2007, respectively. SinceThe lower effective tax rate in the second quarter has seasonally low income from continuing operations before income tax expense, discrete items or changescurrent year is due primarily to the goodwill impairment charge as only a portion of the charge is deductible for tax assets and reserves on the Consolidated Statement of Financial Position have a more significant impact on the Corporation’s quarterly effective tax rate.purposes.

As of August 29,November 28, 2008, the Corporation had $25.7$24.1 million in gross unrecognized tax benefits. During the second quarterand third quarters of 2009, the Corporation’s unrecognized tax positions decreased approximately $2$2.2 million and $1.6 million, respectively, due primarily to settlements and related cash payments associated with certain state examinations.

Included in the balance of unrecognized tax benefits at August 29,November 28, 2008, was $21.0$20.8 million in unrecognized tax benefits, the recognition of which would have a favorable effect on the effective tax rate. It is reasonably possible that the Corporation’sThe Corporation does not anticipate any material changes in its unrecognized tax positions as of August 29, 2008 could decrease approximately $2 million due to anticipated settlements and resulting cash payments related to open years after 1999, which are currently under audit.during the next twelve months. As of August 29,November 28, 2008, the total amount of gross accrued interest and penalties included in the Consolidated Statement of Financial Position was $6.3 million.$3.9 million, which is a decrease from February 29, 2008 resulting primarily from interest payments related to the above mentioned settlements.

The Corporation is subject to examination by the U.S. Internal Revenue Service and various U.S. state and local jurisdictions for tax years 1996 to the present. The Corporation is also subject to tax examination in various foreign tax jurisdictions, including Canada, the United Kingdom (“U.K.”), Australia, France, Italy, Mexico and New Zealand for tax years 2003 to the present.

Note 1415 – Business Segment Information