UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 11-K

 

(Mark One):

þ		ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the fiscal year ended December 31, 2006.

o		TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from                      to                     

A. Full title of the plan and the address of the plan, if different from that of the issuer named below:

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

 

 

REQUIRED INFORMATION

The following financial statements are being furnished for the American Greetings Retirement Profit Sharing and Savings Plan (the “Plan”):

	1.		Audited statement of net assets available for benefits as of December 31, 2006 and 2005.
	2.		Audited statement of changes in net assets available for benefits for the years ended December 31, 2006 and 2005.

EXHIBITS

Exhibit No.

23           Consent of Independent Registered Public Accounting Firm

SIGNATURES

The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the Plan) 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

Audited Financial Statements
and Supplemental Schedule

Years Ended December 31, 2006 and 2005

Table of Contents

Report of Independent Registered Public Accounting Firm			1
Audited Financial Statements
Statement of Net Assets Available for Benefits			2
Statement of Changes in Net Assets Available for Benefits			3
Notes to Financial Statements			4
Supplemental Schedule
Schedule H, Line 4i – Schedule of Assets (Held at End of Year)			9

Report of Independent Registered Public Accounting Firm

The Advisory Committee of the American Greetings
 Retirement Profit Sharing and Savings Plan
Cleveland, Ohio

We have audited the accompanying statement of net assets available for benefits of American Greetings Retirement Profit Sharing and Savings Plan as of December 31, 2006 and 2005, and the related statement 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 the standards of the Public Company Accounting Oversight Board (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. We were not engaged to perform an audit of the Plan’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and 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, 2006 and 2005, and the changes in its net assets available for benefits for the years then ended, in conformity with U.S. generally accepted accounting principles.

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, 2006, 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 27, 2007

American Greetings
Retirement Profit Sharing and Savings Plan

Statement of Net Assets Available for Benefits

		December 31
		2006				2005
Assets
Investments, at fair value		$	735,343,930			$	688,695,659
Participant loans			2,068,331				1,188,089
Contribution receivables:
Employer			11,296,454				16,678,702
Participants			71,438				68,084
Total contribution receivables			11,367,892				16,746,786
Net assets available for benefits		$	748,780,153			$	706,630,534

See accompanying notes.

American Greetings
Retirement Profit Sharing and Savings Plan

Statement of Changes in Net Assets Available for Benefits

		Years Ended December 31
		2006				2005
Additions
Investment income:
Net appreciation in fair value of investments		$	43,390,084			$	9,770,571
Interest and dividends			34,826,160				24,605,728
Contributions:
Participants			18,183,943				16,872,022
Employer			11,296,454				16,678,702
Rollovers			743,898				640,489
Total additions			108,440,539				68,567,512
Deductions
Benefits paid directly to participants			66,231,434				88,177,225
Administrative expenses			59,486				40,960
Total deductions			66,290,920				88,218,185
Net increase (decrease)			42,149,619				(19,650,673	)
Net assets available for benefits at beginning of year			706,630,534				726,281,207
Net assets available for benefits at end of year		$	748,780,153			$	706,630,534

See notes to financial statements.

American Greetings
Retirement Profit Sharing and Savings Plan

Notes to Financial Statements

Years Ended December 31, 2006 and 2005

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, nonunion employees and certain union employees of American Greetings Corporation (the Corporation and Plan Sponsor) 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 gains and losses from capital assets, dividends and foreign currency transactions, to the Plan. A contribution of $2,451,343 and $10,991,679 was made by the Corporation in 2006 and 2005, respectively, based on the Corporation’s pretax profits for its fiscal year-end February 28, 2007 and 2006, respectively. Additional discretionary amounts may be contributed at the option of the Corporation. The Corporation made a discretionary contribution of $4,300,000 and $1,392,162 in 2006 and 2005, respectively.

Participants may contribute 2% to 50% of pretax annual compensation (401(k) contributions) to the Plan, as defined in the Plan. The Corporation may restrict individual contributions below 50% in order to meet certain governmental limitations. The Corporation annually 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 $4,545,111 and $4,294,861 in 2006 and 2005, 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.

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) matching contribution 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 less if a participant had an outstanding plan loan in the prior 12 months) or 50% of their account balance. Loan terms range from six to sixty months, or a reasonable period of time not to exceed 20 years 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, to be paid in monthly, quarterly or annual installments, or rollover their distribution to an individual retirement account or other eligible plan.

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.

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 shares of the Corporation are valued at the last reported sales price of the Corporation’s Class A common shares 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 U.S. generally accepted accounting principles requires management to make estimates that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

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
		2006				2005
Vanguard 500 Index Fund Investor Shares		$	133,338,386			$	125,817,850
Vanguard PRIMECAP Fund Investor Shares			205,391,122				198,548,386
Vanguard Wellington Fund Investor Shares			66,173,313				59,781,757
Vanguard Windsor II Fund Investor Shares			41,319,286				37,419,610
Vanguard Prime Money Market Fund			68,105,248				60,993,153
JP Morgan Core Bond Select Fund			104,230,764				112,803,399

During the years ended December 31, 2006 and 2005, 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:

		2006				2005
Registered investment companies		$	41,133,919			$	13,188,369
Common shares of American Greetings Corporation			2,256,165				(3,417,798	)
Net appreciation in fair value of investments		$	43,390,084			$	9,770,571

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 (the IRS) dated December 9, 2004, 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 determination by the IRS, the Plan was amended. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification. The Plan administrator believes the Plan is being operated in compliance, in all material respects, 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 178,402 Class A common shares and 900,000 Class B common shares of American Greetings Corporation at December 31, 2006, with a combined fair value of $25,741,456 (148,845 and 900,000 common shares, respectively, at December 31, 2005, with a combined fair value of $23,043,125). Class B common shares are not publicly traded. Dividend income on the Corporation’s common shares of $338,135 and $335,298 was recognized in 2006 and 2005, respectively. 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 individual fund earnings.

6. Risks and Uncertainties

The Plan invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported in the statement of net assets available for benefits.

American Greetings
Retirement Profit Sharing and Savings Plan

EIN #34-0065325     Plan #001

Schedule H, Line 4i – Schedule of Assets
(Held at End of Year)

December 31, 2006

		Description of
		Investment Including
		Maturity Date,
Identity of Issue, Borrower,		Rate of Interest,				Current
Lessor, or Similar Party		Par, or Maturity Value				Value
Value of interest in registered investment companies
JP Morgan Core Bond Select Fund		9,860,999 shares				$	104,230,764
*Vanguard 500 Index Fund Investor Shares		1,021,046 shares					133,338,386
*Vanguard PRIMECAP Fund Investor Shares		2,978,842 shares					205,391,122
*Vanguard Wellington Fund Investor Shares		2,040,497 shares					66,173,313
*Vanguard Prime Money Market Fund		68,105,248 shares					68,105,248
*Vanguard Target Retirement 2005 Fund		467,075 shares					5,357,351
*Vanguard Target Retirement 2015 Fund		825,056 shares					10,280,201
*Vanguard Target Retirement 2025 Fund		304,126 shares					3,965,803
*Vanguard Target Retirement 2035 Fund		201,922 shares					2,800,661
*Vanguard Target Retirement 2045 Fund		122,473 shares					1,753,813
*Vanguard Target Retirement Income Fund		171,244 shares					1,832,316
*Vanguard Windsor II Fund Investor Shares		1,189,044 shares					41,319,286
*Vanguard Wellesley Income Fund Investor Shares		870,170 shares					18,969,716
*Vanguard International Growth Fund Investor Shares		1,092,149 shares					26,058,673
*Vanguard Extended Market Index Fund Investor Shares		517,731 shares					20,025,821
Total value of interest in registered investment companies							709,602,474
Employer-related investments
*American Greetings Corp. Class A Common Shares		178,402 shares					4,258,456
*American Greetings Corp. Class B Common Shares		900,000 shares					21,483,000
Total employer-related investments							25,741,456
*Loans to participants		5.0% to 10.5%,
		various maturity dates					2,068,331
						$	737,412,261