SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 11-K
ANNUAL REPORT
PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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(Mark One):
X ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
----- 1934.
For the fiscal year ended December 31, 2002.
OR
TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
---- EXCHANGE ACT OF 1934.
For the transition period from __________________ to _________________
Commission file number: 0-1502
A. Full title of the plan and the address of the plan, if
different from that of the issuer name below:
AMERICAN GREETINGS RETIREMENT
PROFIT SHARING AND SAVINGS PLAN
B. Name of issuer of the securities held pursuant to the
plan and the address of its principal executive office:
AMERICAN GREETINGS CORPORATION
ONE AMERICAN ROAD
CLEVELAND, OHIO 44144
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REQUIRED INFORMATION
The following financial statements are being furnished for the American
Greetings Retirement Profit Sharing and Savings Plan (the "Plan"):
1. Audited statements of net assets available for benefits as of
December 31, 2002 and 2001.
2. Audited statements of changes in net assets available for
benefits for the years ended December 31, 2002 and 2001.
EXHIBITS
Exhibit No.
23 Consent of Independent Auditors
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act
of 1934, the trustees have duly caused this annual report to be signed on its
behalf by the undersigned hereunto duly authorized.
AMERICAN GREETINGS RETIREMENT
PROFIT SHARING AND SAVINGS PLAN
June 26, 2003 By: /s/ Robert P. Ryder
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Name: Robert P. Ryder
Title: Senior Vice President
and Chief Financial Officer
-2-
AUDITED FINANCIAL STATEMENTS
AND SUPPLEMENTAL SCHEDULE
American Greetings Retirement Profit Sharing and Savings Plan
Years ended December 31, 2002 and 2001
with Report of Independent Auditors
American Greetings
Retirement Profit Sharing and Savings Plan
Audited Financial Statements
and Supplemental Schedule
Years ended December 31, 2002 and 2001
TABLE OF CONTENTS
Report of Independent Auditors....................................................................................1
Audited Financial Statements
Statements of Net Assets Available for Benefits...................................................................2
Statements of Changes in Net Assets Available for Benefits........................................................3
Notes to Financial Statements.....................................................................................4
Supplemental Schedule
Schedule H, Line 4(i)--Schedule of Assets (Held at End of Year)...................................................9
Report of Independent Auditors
Administrative Committee of the American Greetings
Retirement Profit Sharing and Savings Plan
Cleveland, Ohio
We have audited the accompanying statements of net assets available for benefits
of American Greetings Retirement Profit Sharing and Savings Plan as of December
31, 2002 and 2001, and the related statements of changes in net assets available
for benefits for the years then ended. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan at
December 31, 2002 and 2001, and the changes in its net assets available for
benefits for the years then ended, in conformity with accounting principles
generally accepted in the United States.
Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedule of assets
(held at end of year) as of December 31, 2002, is presented for purposes of
additional analysis and is not a required part of the financial statements but
is supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. This supplemental schedule is the responsibility of the
Plan's management. The supplemental schedule has been subjected to the auditing
procedures applied in our audits of the financial statements and, in our
opinion, is fairly stated in all material respects in relation to the financial
statements taken as a whole.
/s/ Ernst & Young LLP
Cleveland, Ohio
June 12, 2003
1
American Greetings
Retirement Profit Sharing and Savings Plan
Statements of Net Assets Available for Benefits
DECEMBER 31
2002 2001
------------ ------------
ASSETS
Investments, at fair value $574,746,751 $719,178,153
Contribution receivables:
Employer 18,533,026 9,424,207
Participants 1,320,755 1,382,845
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Total receivables 19,853,781 10,807,052
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Net assets available for benefits $594,600,532 $729,985,205
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See notes to financial statements.
2
American Greetings
Retirement Profit Sharing and Savings Plan
Statements of Changes in Net Assets Available for Benefits
YEARS ENDED DECEMBER 31
2002 2001
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ADDITIONS
Investment income (loss):
Net depreciation in fair value
of investments $ (87,892,657) $ (57,497,294)
Interest and dividends 15,399,166 23,375,787
Dividends from American Greetings
Corporation common stock -- 977,372
Contributions:
Participants 16,964,373 18,588,460
Employer 18,533,026 9,424,207
Rollovers 490,342 443,478
Transfer from AmericanGreetings.com 401(k) Plan 4,730,145 --
Transfer from Gibson Greetings and
CPS Corporation 401(k) Plans -- 40,005,445
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Total (31,775,605) 35,317,455
DEDUCTIONS
Benefits paid directly to participants 103,572,385 70,124,163
Administrative expenses 36,683 36,921
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Total 103,609,068 70,161,084
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Net decrease (135,384,673) (34,843,629)
Net assets available for benefits at beginning of year 729,985,205 764,828,834
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Net assets available for benefits at end of year $ 594,600,532 $ 729,985,205
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See notes to financial statements.
3
American Greetings
Retirement Profit Sharing and Savings Plan
Notes to Financial Statements
Years ended December 31, 2002 and 2001
1. DESCRIPTION OF PLAN
The following description of the American Greetings Retirement Profit Sharing
and Savings Plan (the Plan) provides only general information. Participants
should refer to the Plan Agreement for a more complete description of the Plan's
provisions.
GENERAL
The Plan is a defined contribution plan covering substantially all full-time
non-union employees and certain union employees of American Greetings
Corporation (the Corporation) and its domestic subsidiaries. The Plan is subject
to the provisions of the Employee Retirement Income Security Act of 1974
(ERISA).
CONTRIBUTIONS
The Corporation annually contributes 8% of its consolidated domestic pretax
profits (as defined), excluding dividends and gains and losses from capital
assets and foreign currency transactions, to the Plan. A contribution of
$13,637,388 and $0 was made in 2002 and 2001, respectively, based on the
Corporation's pretax profits. Additional amounts may be contributed at the
option of the Corporation's Board of Directors. The Corporation made a
discretionary contribution of $0 and $4,365,108 in 2002 and 2001, respectively.
Additionally, participants may contribute 2% to 15% of pretax annual
compensation (401(k) contributions), as defined in the Plan. The Corporation may
restrict individual contributions below 15% in order to meet certain
governmental limitations. The Corporation contributes 40% of the first 6% of
pretax annual compensation that a participant contributes to the Plan, provided
that the Corporation achieves certain predetermined financial goals. The
Corporation's matching contribution was $4,895,638 and $5,059,099 in 2002 and
2001, respectively. All contributions are invested in accordance with the
participants' investment elections.
Participants direct the investment of their accounts, together with their share
of the Corporation's annual contributions, in increments of 1% to any of the
investment options offered under the Plan.
4
American Greetings
Retirement Profit Sharing and Savings Plan
Notes to Financial Statements (continued)
1. DESCRIPTION OF THE PLAN (CONTINUED)
PARTICIPANT ACCOUNTS AND VESTING
Each participant's account is credited with the participant's 401(k)
contributions and allocations of (a) the Corporation's profit sharing
contribution and 401(k) match and (b) Plan earnings. Allocations are based on
participant compensation, participant elections, or account balances, as
defined. Individuals who have retired or terminated employment with the
Corporation do not participate in the Corporation's future contributions to the
Plan. The benefit to which a participant is entitled is the benefit that can be
provided from the participant's account. Participants are immediately vested in
both their and the Corporation's contributions, plus actual earnings thereon.
PARTICIPANT LOANS
Participants may borrow against their elected deferred contributions or rollover
contributions, a minimum of $1,000 up to a maximum equal to the lesser of
$50,000 or 50% of their account balance. Loan terms range from six to sixty
months, or a reasonable period of time as determined by the Administrative
Committee, for loans used for the purchase of a participant's primary residence.
The loans are secured by the balance in the participant's account and bear
interest at a rate of prime plus one percent at the time of the loan
origination. Principal and interest are paid ratably through monthly payroll
deductions.
PAYMENT OF BENEFITS
At the time of a participant's retirement or termination of service, the
participant may elect to receive a lump sum payment or to be paid in monthly,
quarterly or annual installments.
PLAN TERMINATION
Although it has not expressed any intent to do so, the Corporation has the right
under the Plan to discontinue its contributions at any time and to terminate the
Plan subject to the provisions of ERISA. In the event of Plan termination, the
assets of the Plan will be distributed to the participants on the basis of
individual account balances at the date of termination.
5
American Greetings
Retirement Profit Sharing and Savings Plan
Notes to Financial Statements (continued)
2. SUMMARY OF ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The financial statements have been prepared on the accrual basis of accounting.
INVESTMENT VALUATION AND INCOME RECOGNITION
The Plan's investments are stated at fair value. The shares of registered
investment companies are valued at quoted market prices which represent the net
asset values of shares held by the Plan at year-end. The common stock of the
Corporation is valued at the last reported sales price on the last business day
of the plan year. The participant loans are valued at their outstanding
balances, which approximate fair value.
Purchases and sales of investments are recorded on a trade-date basis. Interest
income is recorded on the accrual basis. Dividend income is recorded on the
ex-dividend date.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
RECLASSIFICATION
Certain amounts in the 2001 financial statements have been reclassified to
conform to the 2002 presentation.
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American Greetings
Retirement Profit Sharing and Savings Plan
Notes to Financial Statements (continued)
3. INVESTMENTS
The Plan's investments are held by Vanguard Fiduciary Trust Company, Trustee of
the Plan. The fair value of individual investments that represent 5% or more of
the fair value of the Plan's net assets are as follows:
DECEMBER 31
2002 2001
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Vanguard 500 Index Fund Investor Shares $ 99,487,077 $146,014,997
Vanguard PRIMECAP Fund 131,925,675 203,764,732
Vanguard Wellington Fund Investor Shares 43,345,365 52,649,061
Vanguard Prime Money Market Fund 80,931,443 92,134,646
Vanguard Total Bond Market Index Fund 141,782,543
One Group Bond Fund; Class I Shares 140,593,940
During the year ended December 31, 2002 and 2001, the Plan's investments
(including investments purchased, sold, as well as held during the year)
appreciated (depreciated) in fair value as determined by quoted market prices as
follows:
2002 2001
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Registered investment companies $(92,278,533) $(67,505,762)
Common/collective trust funds -- 48,498
Common stock of American Greetings Corporation 4,385,876 9,959,970
------------ ------------
Net depreciation in fair value of investments $(87,892,657) $(57,497,294)
============ ============
7
American Greetings
Retirement Profit Sharing and Savings Plan
Notes to Financial Statements (continued)
4. INCOME TAX STATUS
The Plan has received a determination letter from the Internal Revenue Service
dated August 24, 1995, stating that the Plan is qualified under Section 401(a)
of the Internal Revenue Code (the Code) and, therefore, the related trust is
exempt from taxation. Subsequent to this issuance of the determination letter,
the Plan was amended. Once qualified, the Plan is required to operate in
conformity with the Code to maintain its qualification. The Plan's
Administrative Committee believes the Plan is being operated in compliance with
the applicable requirements of the Code and, therefore, believes that the Plan,
as amended, is qualified and the related trust is tax exempt.
5. TRANSACTIONS WITH PARTIES-IN-INTEREST
The Plan held 949,480 Class A shares and 900,000 Class B shares of American
Greetings Corporation common stock at December 31, 2002 with a combined fair
value of $29,221,784 (1,270,887 and 900,000 shares, respectively, at December
31, 2001 with a combined fair value of $29,914,823). Class B shares are not
publicly traded. The Plan invests in shares of mutual funds managed by an
affiliate of the Trustee. Accounting, legal and certain other administrative
fees are paid by the Corporation. All other expenses of the Plan are paid by the
Plan. Investment advisory fees for portfolio management of Vanguard Funds are
paid directly from fund earnings.
6. TRANSFERS OF ASSETS FROM OTHER PLANS
Effective at the close of business on November 18, 2002, the
AmericanGreetings.com 401(k) Plan was merged with the Plan and net assets of
$4,730,145, representing participant account balances as of that date, were
transferred to the Plan. AmericanGreetings.com is a majority owned subsidiary of
American Greetings.
On March 9, 2000, the Corporation acquired Gibson Greetings, Inc. Effective at
the close of business on December 31, 2000, the Gibson Greetings, Inc. 401(k)
Plan was merged with the Plan and net assets of approximately $27.7 million
representing participant account balances as of that date were transferred to
the Plan on January 1, 2001. In addition, the Corporation acquired CPS
Corporation on July 13, 2000. Effective at the close of business on December 31,
2000, the CPS Corporation of Delaware Personal Retirement Savings Plan and the
CPS Corporation-Henderson Hourly Employee Savings Plan were merged with the Plan
and net assets of approximately $12.3 million representing participant account
balances as of that date were transferred to the Plan on January 1, 2001.
8
American Greetings
Retirement Profit Sharing and Savings Plan
EIN: 34-0065325 Plan Number: 001
Schedule H, Line 4(i)--Schedule of Assets
(Held at End of Year)
December 31, 2002
DESCRIPTION OF INVESTMENT
INCLUDING MATURITY DATE,
IDENTITY OF ISSUE, BORROWER, RATE OF INTEREST, CURRENT
LESSOR OR SIMILAR PARTY PAR OR MATURITY VALUE VALUE
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VALUE OF INTEREST IN REGISTERED INVESTMENT COMPANIES
One Group Bond Fund; Class I Shares 12,631,980 shares $140,593,940
*Vanguard 500 Index Fund Investor Shares 1,225,965 shares 99,487,077
*Vanguard PRIMECAP Fund 3,412,459 shares 131,925,675
*Vanguard Wellington Fund Investor Shares 1,764,876 shares 43,345,365
*Vanguard Prime Money Market Fund 80,931,443 shares 80,931,443
*Vanguard Windsor II Investor Shares 983,171 shares 20,449,956
*Vanguard Wellesley Income Fund Investor Shares 789,605 shares 15,713,139
*Vanguard International Growth Fund 473,938 shares 5,763,083
*Vanguard Extended Market Index Fund Investor Shares 301,630 shares 5,652,540
------------
Total value of interest in registered investment companies 543,862,218
EMPLOYER-RELATED INVESTMENTS
*American Greetings Corp. Class A Common Stock 949,480 shares 15,001,784
*American Greetings Corp. Class B Common Stock 900,000 shares 14,220,000
------------
Total employer-related investments 29,221,784
*LOANS TO PARTICIPANTS 5.25% to 10.5%,
Various maturity dates 1,662,749
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$574,746,751
============
* Indicates party-in-interest to the Plan.
9