11-K 1 l01649ae11vk.txt AMERICAN GREETINGS SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------------- FORM 11-K ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ----------------- (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 ----------------- 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 ------------------------------ 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 ------------ ------------ Total receivables 19,853,781 10,807,052 ------------ ------------ Net assets available for benefits $594,600,532 $729,985,205 ============ ============
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 ------------- ------------- 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 ------------- ------------- 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 ------------- ------------- Total 103,609,068 70,161,084 ------------- ------------- Net decrease (135,384,673) (34,843,629) Net assets available for benefits at beginning of year 729,985,205 764,828,834 ------------- ------------- Net assets available for benefits at end of year $ 594,600,532 $ 729,985,205 ------------- -------------
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. 6 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 ------------ ------------ 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 ------------ ------------ 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 ---------------------------------------------------------------------------------------------------------------------------- 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 ------------ $574,746,751 ============
* Indicates party-in-interest to the Plan. 9