-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OU4pw9vgOq21RlKnauDqVXyiRbyVoFi7eAbksLyMiOWNyJVH6aohPlXeGV6hICrx 6KcsXIa1TRB7OyLFI1Rg1A== 0000950152-98-005613.txt : 19980629 0000950152-98-005613.hdr.sgml : 19980629 ACCESSION NUMBER: 0000950152-98-005613 CONFORMED SUBMISSION TYPE: 11-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980626 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN GREETINGS CORP CENTRAL INDEX KEY: 0000005133 STANDARD INDUSTRIAL CLASSIFICATION: GREETING CARDS [2771] IRS NUMBER: 340065325 STATE OF INCORPORATION: OH FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 11-K SEC ACT: SEC FILE NUMBER: 001-13859 FILM NUMBER: 98655155 BUSINESS ADDRESS: STREET 1: 10500 AMERICAN RD CITY: CLEVELAND STATE: OH ZIP: 44144 BUSINESS PHONE: 2162527300 MAIL ADDRESS: STREET 1: 10500 AMERICAN ROAD CITY: CLEVELAND STATE: OH ZIP: 44144 11-K 1 AMERICAN GREETINGS RETIREMENT PROFIT SHARE. 11-K 1 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, 1997. 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, 1997 and 1996. 2 2. Audited statements of changes in net assets available for benefits for the years ended December 31, 1997 and 1996. 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, 1998 By: /s/ Pat Papesh ------------------------------ Name: Pat Papesh Title: Senior Vice-President -2- 3 EXHIBIT INDEX Exhibit No. 23 Consent of Independent Auditors 4 Audited Financial Statements and Supplemental Schedules AMERICAN GREETINGS RETIREMENT PROFIT SHARING AND SAVINGS PLAN Years ended December 31, 1997 and 1996 with Report of Independent Auditors 5 American Greetings Retirement Profit Sharing and Savings Plan Audited Financial Statements and Supplemental Schedules Years Ended December 31, 1997 and 1996 CONTENTS Report of Independent Auditors .................................................... 1 AUDITED FINANCIAL STATEMENTS Statements of Net Assets Available for Benefits With Fund Information.............. 2 Statements of Changes in Net Assets Available for Benefits with Fund Information.......................................................... 4 Notes to Financial Statements ..................................................... 6 SUPPLEMENTAL SCHEDULES Form 5500, Item 27a - Schedule of Assets Held for Investment Purposes.............. 14 Form 5500, Item 27d - Schedule of Reportable Transactions ......................... 15
6 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 (the "Plan") as of December 31, 1997 and 1996, 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 generally accepted auditing standards. 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, 1997 and 1996, and the changes in its net assets available for benefits for the years then ended, in conformity with 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 schedules of assets held for investment purposes as of December 31, 1997 and reportable transactions for the year then ended are presented for purposes of complying with the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974, and are not a required part of the financial statements. The fund information in the statements of net assets available for benefits and the statements of changes in net assets available for benefits is presented for purposes of additional analysis rather than to present the net assets available for benefits and changes in net assets available for benefits of each fund. The supplemental schedules and fund information have been subjected to the auditing procedures applied in our audits of the financial statements and, in our opinion, are fairly stated in all material respects in relation to the financial statements taken as a whole. Ernst & Young LLP Cleveland, Ohio June 19, 1998 7 American Greetings Retirement Profit Sharing and Savings Plan Statement of Net Assets Available for Benefits with Fund Information December 31, 1997
Growth and Growth and Balanced Fund Balanced Fund Income Income (Stocks and (Stocks and Stock Fund-- Stock Fund-- Growth Bonds)-- Bonds)-- Index Trust Windsor II Stock Fund Wellington Wellesley ----------------------------------------------------------------------------------------- ASSETS Investments, at fair value: Shares in registered investment companies: Vanguard Index Trust-- 500 Portfolio $140,532,689 Vanguard/PRIMECAP Fund $152,439,572 Vanguard/Wellington Fund $50,755,741 Vanguard Money Market Reserves--Prime Portfolio Bond Index/IC Fund Vanguard/Windsor II $23,566,591 Vanguard/Wellesley Income Fund $4,919,816 Vanguard International Growth Portfolio Common Stock of American Greetings Corporation Deposits with insurance companies Participant notes receivable ----------------------------------------------------------------------------------------- Total investments 140,532,689 23,566,591 152,439,572 50,755,741 4,919,816 Receivables: Employer's contribution 5,603,097 1,092,699 6,449,031 1,979,104 185,902 Participants' contributions 236,285 57,052 268,479 90,967 11,381 Other 9,056 1,211 11,231 2,798 144 ----------------------------------------------------------------------------------------- Total receivables 5,848,438 1,150,962 6,728,741 2,072,869 197,427 ----------------------------------------------------------------------------------------- Total assets 146,381,127 24,717,553 159,168,313 52,828,610 5,117,243 LIABILITIES Accrued liabilities ----------------------------------------------------------------------------------------- NET ASSETS AVAILABLE FOR BENEFITS $146,381,127 $24,717,553 $159,168,313 $52,828,610 $5,117,243 ========================================================================================= Money Bond Index/ Market Investment International Company Participant Fund Contract Fund Stock Fund Stock Fund Loan Fund Total -------------------------------------------------------------------------------------- ASSETS Investments, at fair value: Shares in registered investment companies: Vanguard Index Trust-- 500 Portfolio $140,532,689 Vanguard/PRIMECAP Fund 152,439,572 Vanguard/Wellington Fund 50,755,741 Vanguard Money Market Reserves--Prime Portfolio $39,473,598 $149,577 39,623,175 Bond Index/IC Fund $150,615,489 150,615,489 Vanguard/Windsor II 23,566,591 Vanguard/Wellesley Income Fund 4,919,816 Vanguard International Growth Portfolio $5,963,670 5,963,670 Common Stock of American Greetings Corporation 38,448,858 38,448,858 Deposits with insurance 2,212,848 2,212,848 companies Participant notes receivable $1,306,194 1,306,194 -------------------------------------------------------------------------------------- Total investments 39,473,598 152,828,337 5,963,670 38,598,435 1,306,194 610,384,643 Receivables: Employer's contribution 2,707,016 6,299,284 420,844 2,023,706 26,760,683 Participants' contributions 60,321 175,243 25,295 81,319 1,006,342 Other 2,595 7,535 900 3,200 38,670 -------------------------------------------------------------------------------------- Total receivables 2,769,932 6,482,062 447,039 2,108,225 27,805,695 -------------------------------------------------------------------------------------- Total assets 42,243,530 159,310,399 6,410,709 40,706,660 1,306,194 638,190,338 LIABILITIES Accrued liabilities 311,896 129,396 441,292 -------------------------------------------------------------------------------------- NET ASSETS AVAILABLE FOR BENEFITS $42,243,530 $158,998,503 $6,410,709 $40,577,264 $1,306,194 $637,749,046 ======================================================================================
See notes to financial statements. 2 8 American Greetings Retirement Profit Sharing and Savings Plan Statement of Net Assets Available for Benefits with Fund Information December 31, 1996
Growth and Growth and Balanced Fund Balanced Fund Income Income (Stocks and (Stocks and Stock Fund-- Stock Fund-- Growth Bonds)-- Bonds)-- Index Trust Windsor II Stock Fund Wellington Wellesley ------------------------------------------------------------------------------- ASSETS Investments, at fair value: Shares in registered investment companies: Vanguard Index Trust-- 500 Portfolio $94,080,769 Vanguard/PRIMECAP Fund $99,286,904 Vanguard/Wellington Fund $38,026,710 Vanguard Money Market Reserves--Prime Portfolio Bond Index/IC Fund Vanguard/Windsor II $12,513,997 Vanguard/Wellesley Income Fund $2,382,901 Vanguard International Growth Portfolio Common Stock of American Greetings Corporation Deposits with insurance companies Participant notes receivable ------------------------------------------------------------------------------- Total investments 94,080,769 12,513,997 99,286,904 38,026,710 2,382,901 Receivables: Employer's contribution 4,951,704 912,619 5,507,077 1,784,152 115,331 Participants' contributions 148,859 20,628 173,713 53,257 3,166 Other 4,860 577 5,783 1,232 97 ------------------------------------------------------------------------------- Total receivables 5,105,423 933,824 5,686,573 1,838,641 118,594 ------------------------------------------------------------------------------- Total assets 99,186,192 13,447,821 104,973,477 39,865,351 2,501,495 LIABILITIES Accrued liabilities--net ------------------------------------------------------------------------------- NET ASSETS AVAILABLE FOR BENEFITS $99,186,192 $13,447,821 $104,973,477 $39,865,351 $2,501,495 =============================================================================== Money Bond Index/ Market Investment International Company Participant Fund Contract Fund Stock Fund Stock Fund Loan Fund Total --------------------------------------------------------------------------------- ASSETS Investments, at fair value: Shares in registered investment companies: Vanguard Index Trust-- 500 Portfolio $94,080,769 Vanguard/PRIMECAP Fund 99,286,904 Vanguard/Wellington Fund 38,026,710 Vanguard Money Market Reserves--Prime Portfolio $42,696,070 $ 111,973 42,808,043 Bond Index/IC Fund $162,992,325 162,992,325 Vanguard/Windsor II 12,513,997 Vanguard/Wellesley Income Fund 2,382,901 Vanguard International Growth Portfolio $5,712,024 5,712,024 Common Stock of American Greetings Corporation 31,785,930 31,785,930 Deposits with insurance companies 2,085,286 2,085,286 Participant notes receivable $ 906,394 906,394 --------------------------------------------------------------------------------- Total investments 42,696,070 165,077,611 5,712,024 31,897,903 906,394 492,581,283 Receivables: Employer's contribution 2,359,458 7,588,594 364,430 2,103,853 25,687,218 Participants' contributions 38,498 175,460 12,329 77,444 703,354 Other 2,388 5,696 579 2,777 23,989 --------------------------------------------------------------------------------- Total receivables 2,400,344 7,769,750 377,338 2,184,074 26,414,561 --------------------------------------------------------------------------------- Total assets 45,096,414 172,847,361 6,089,362 34,081,977 906,394 518,995,844 LIABILITIES Accrued liabilities--net 41,458 41,458 --------------------------------------------------------------------------------- NET ASSETS AVAILABLE FOR BENEFITS $45,096,414 $172,847,361 $6,089,362 $34,040,519 $ 906,394 $518,954,386 =================================================================================
See notes to financial statements. 3 9 American Greetings Retirement Profit Sharing and Savings Plan Statement of Changes in Net Assets Available for Benefits with Fund Information For the Year Ended December 31, 1997
Growth and Growth and Balanced Fund Balanced Fund Income Income (Stocks and (Stocks and Money Stock Fund-- Stock Fund-- Growth Bonds)-- Bonds)- Market Index Trust Windsor II Stock Fund Wellington Wellesley Fund ------------------------------------------------------------------------------------- ADDITIONS TO NET ASSETS ATTRIBUTED TO: Net appreciation (depreciation) in fair value of investments $30,919,973 $2,981,694 $33,174,176 $4,975,296 $188,228 Interest and dividend income 2,886,203 2,116,092 5,511,784 4,290,550 494,992 $2,202,440 Dividends from American Greetings Corporation common stock Contributions: Participants 3,503,156 841,654 3,990,917 1,340,217 132,086 968,533 Rollover 167,948 148,261 124,959 71,695 14,153 56,525 Employer 5,604,456 1,092,596 6,450,725 1,980,040 185,876 2,707,209 ------------------------------------------------------------------------------------- Total additions 43,081,736 7,180,297 49,252,561 12,657,798 1,015,335 5,934,707 DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO: Benefits paid to participants 5,763,107 1,033,938 6,278,501 2,425,308 211,880 4,749,636 Administrative expenses 8,070 1,172 8,001 2,700 246 13,249 ------------------------------------------------------------------------------------- Total deductions 5,771,177 1,035,110 6,286,502 2,428,008 212,126 4,762,885 ------------------------------------------------------------------------------------- Net increase prior to interfund 37,310,559 6,145,187 42,966,059 10,229,790 803,209 1,171,822 transfers Interfund transfers--net 9,884,376 5,124,545 11,228,777 2,733,469 1,812,539 (4,024,706) ------------------------------------------------------------------------------------- Net increase (decrease) 47,194,935 11,269,732 54,194,836 12,963,259 2,615,748 (2,852,884) Net assets available for benefits at beginning of year 99,186,192 13,447,821 104,973,477 39,865,351 2,501,495 45,096,414 ------------------------------------------------------------------------------------- NET ASSETS AVAILABLE FOR BENEFITS AT END OF YEAR $146,381,127 $24,717,553 $159,168,313 $52,828,610 $5,117,243 $42,243,530 ===================================================================================== Bond Index/ Investment International Company Participant Contract Fund Stock Fund Stock Fund Loan Fund Total --------------------------------------------------------------------------- ADDITIONS TO NET ASSETS ATTRIBUTED TO: Net appreciation (depreciation) in fair value of investments $3,910,941 $(56,611) $11,183,499 $87,277,196 Interest and dividend income 10,316,317 261,874 8,311 $87,239 28,175,802 Dividends from American Greetings Corporation common stock 731,832 731,832 Contributions: Participants 2,891,131 399,137 1,263,997 15,330,828 Rollover 38,129 34,008 29,841 685,519 Employer 6,296,215 420,814 2,022,752 26,760,683 --------------------------------------------------------------------------- Total additions 23,452,733 1,059,222 15,240,232 87,239 158,961,860 DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO: Benefits paid to participants 16,896,507 315,705 2,339,582 67,400 40,081,564 Administrative expenses 13,920 572 37,706 85,636 --------------------------------------------------------------------------- Total deductions 16,910,427 316,277 2,377,288 67,400 40,167,200 --------------------------------------------------------------------------- Net increase prior to interfund transfers 6,542,306 742,945 12,862,944 19,839 118,794,660 Interfund transfers--net (20,391,164) (421,598) (6,326,199) 379,961 --------------------------------------------------------------------------- Net increase (decrease) (13,848,858) 321,347 6,536,745 399,800 118,794,660 Net assets available for benefits at beginning of year 172,847,361 6,089,362 34,040,519 906,394 518,954,386 --------------------------------------------------------------------------- NET ASSETS AVAILABLE FOR BENEFITS AT END OF YEAR $158,998,503 $6,410,709 $40,577,264 $1,306,194 $637,749,046 ===========================================================================
See notes to financial statements. 4 10 American Greetings Retirement Profit Sharing and Savings Plan Statement of Changes in Net Assets Available for Benefits With Fund Information For the Year Ended December 31, 1996
Growth and Growth and Balanced Fund Balanced Fund Income Income (Stocks and (Stocks and Money Stock Fund-- Stock Fund-- Growth Bonds)-- Bonds)-- Market Index Trust Windsor II Stock Fund Wellington Wellesley Fund ----------------------------------------------------------------------------------------- ADDITIONS TO NET ASSETS ATTRIBUTED TO: Net appreciation (depreciation) in fair value of investments $15,045,831 $ 909,756 $12,500,466 $2,281,322 $ 8,233 Interest and dividend income 2,016,535 846,276 2,984,590 2,963,921 214,290 $ 1,667,739 Dividends from American Greetings Corporation common stock Contributions: Participants 2,935,535 352,481 3,651,244 1,187,274 87,150 791,455 Rollover 91,156 25,863 76,972 63,049 11,892 17,623 Employer 4,963,804 912,619 5,521,871 1,785,305 115,331 2,359,642 ----------------------------------------------------------------------------------------- Total additions 25,052,861 3,046,995 24,735,143 8,280,871 436,896 4,836,459 DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO: Benefits paid to participants 4,162,750 261,857 4,335,825 1,190,790 75,572 3,033,057 Administrative expenses 11,462 724 12,913 3,731 180 7,390 ----------------------------------------------------------------------------------------- Total deductions 4,174,212 262,581 4,348,738 1,194,521 75,752 3,040,447 ----------------------------------------------------------------------------------------- Net increase prior to interfund transfers 20,878,649 2,784,414 20,386,405 7,086,350 361,144 1,796,012 Interfund transfers--net 6,628,748 10,456,150 (4,272,823) 2,199,506 2,052,556 10,689,608 ----------------------------------------------------------------------------------------- Net increase (decrease) 27,507,397 13,240,564 16,113,582 9,285,856 2,413,700 12,485,620 Net assets available for benefits at beginning of year 71,678,795 207,257 88,859,895 30,579,495 87,795 32,610,794 ----------------------------------------------------------------------------------------- NET ASSETS AVAILABLE FOR BENEFITS AT END OF YEAR $99,186,192 $13,447,821 $104,973,477 $39,865,351 $2,501,495 $45,096,414 ========================================================================================= Bond Index/ Investment International Company Participant Contract Fund Stock Fund Stock Fund Loan Fund Total --------------------------------------------------------------------------- ADDITIONS TO NET ASSETS ATTRIBUTED TO: Net appreciation (depreciation) in fair value of investments $(4,715,088) $ 315,267 $ 853,481 $27,199,268 Interest and dividend income 11,541,142 243,968 8,724 $ 63,639 22,550,824 Dividends from American Greetings Corporation common stock 731,026 731,026 Contributions: Participants 3,560,577 266,566 1,500,313 14,332,595 Rollover 16,530 43,876 20,234 367,195 Employer 7,593,657 365,217 2,113,548 25,730,994 --------------------------------------------------------------------------- Total additions 17,996,818 1,234,894 5,227,326 63,639 90,911,902 DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO: Benefits paid to participants 14,987,091 116,366 1,556,988 55,638 29,775,934 Administrative expenses 31,218 506 7,263 75,387 --------------------------------------------------------------------------- Total deductions 15,018,309 116,872 1,564,251 55,638 29,851,321 --------------------------------------------------------------------------- Net increase prior to interfund transfers 2,978,509 1,118,022 3,663,075 8,001 61,060,581 Interfund transfers--net (26,356,527) 4,763,906 (6,419,435) 258,311 --------------------------------------------------------------------------- Net increase (decrease) (23,378,018) 5,881,928 (2,756,360) 266,312 61,060,581 Net assets available for benefits at beginning of year 196,225,379 207,434 36,796,879 640,082 457,893,805 --------------------------------------------------------------------------- NET ASSETS AVAILABLE FOR BENEFITS AT END OF YEAR $172,847,361 $6,089,362 $34,040,519 $ 906,394 $518,954,386 ===========================================================================
See notes to financial statements. 5 11 American Greetings Retirement Profit Sharing and Savings Plan Notes to Financial Statements Years Ended December 31, 1997 and 1996 A. DESCRIPTION OF THE 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, copies of which are available from the Administrative Committee of the Plan, 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 domestic subsidiaries. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). CONTRIBUTIONS The Corporation contributes 8% of its consolidated domestic pretax profits, excluding dividends and gains and losses from capital assets and foreign currency transactions, to the Plan. Additional amounts may be contributed at the option of the Corporation's Board of Directors. No additional contributions were made in either the 1997 or 1996 plan years. 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 25% of the first 6% of pretax annual compensation that a participant contributes to the Plan, provided that the Corporation achieves certain predetermined financial goals. In 1998, the Corporation amended the Plan to increase its contribution to 40% of the first 6% for all full-time non-union employees and certain union employees. All contributions are invested in accordance with the participants' investment elections. 6 12 American Greetings Retirement Profit Sharing and Savings Plan Notes to Financial Statements--Continued A. DESCRIPTION OF THE PLAN--CONTINUED PARTICIPANT ACCOUNTS Each participant's account is credited with the participant's 401(k) contributions, allocations of the Corporation's profit sharing contribution and 401(k) match, and Plan earnings; allocations are based on participant compensation, participant elections, and account balances, respectively. Individuals who have retired or terminated employment with the Corporation do not participate in the Corporation's contribution 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. INVESTMENT OPTIONS Participants direct the investment of their accounts, together with their share of the Corporation's annual contributions, in increments of 10% to any of the investment options offered under the Plan. The Corporation maintains the following investment options under the Plan: GROWTH AND INCOME STOCK FUNDS Vanguard Index Trust-500 Portfolio--The assets of this fund are invested primarily in common stocks to reflect the composition of Standard & Poor's 500 Composite Stock Price Index (Index). The fund holds virtually all of the Standard & Poor's 500 stocks in the Index in proportion to their relative weight in the Index. Vanguard/Windsor II--The assets of this fund are invested primarily in a diversified portfolio of common stocks of large, established companies that sell at prices below the overall market average. GROWTH STOCK FUND--The assets of this fund are invested primarily in common stocks of large, established companies (Vanguard/PRIMECAP Fund). 7 13 American Greetings Retirement Profit Sharing and Savings Plan Notes to Financial Statements--Continued A. DESCRIPTION OF THE PLAN--CONTINUED BALANCED FUNDS (STOCKS AND BONDS) Vanguard/Wellington Fund--The assets of this fund are invested primarily in a diversified portfolio of equity securities and fixed income securities. Vanguard/Wellesley Income Fund--The assets of this fund are invested primarily in a broadly diversified portfolio of U.S. Government Securities, high-quality corporate bonds and dividend-paying common stocks of large companies. MONEY MARKET FUND--The assets of this fund are invested in high-quality money market instruments that mature in one year or less. These include negotiable certificates of deposit, bankers' acceptances, commercial paper, and other short-term corporate obligations (Vanguard Money Market Reserves-Prime Portfolio). BOND INDEX/INVESTMENT CONTRACT FUND--The assets of this fund are invested primarily in shares of the Vanguard Bond Index Fund--Total Bond Market Portfolio. The Vanguard Bond Index Fund invests in bonds from a variety of industries attempting to match the unmanaged Lehman Brothers Aggregate Bond Index. In addition, the fund's investments include investment contracts of $2,212,848 at December 31, 1997. As these investment contracts mature, the proceeds will be invested in the Vanguard Bond Index Fund--Total Bond Market Portfolio. INTERNATIONAL STOCK FUND--The assets of this fund are invested in the common stocks of about 200 companies selected from more than 15 countries based outside the U.S. (Vanguard International Growth Portfolio). COMPANY STOCK FUND--The assets of this fund are invested in the common stock of the Corporation (American Greetings Company Stock Fund). 8 14 American Greetings Retirement Profit Sharing and Savings Plan Notes to Financial Statements--Continued A. DESCRIPTION OF THE PLAN--CONTINUED PARTICIPANT NOTES RECEIVABLE The Plan permits participants to borrow, against their elected deferred contributions or rollover contributions, a minimum of $1,000 up to a maximum of the lesser of $50,000 or 50% of their account balance. Loan transactions are treated as a transfer from (to) the investment fund to (from) the loan fund. Loan terms range from six to sixty months. 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 over a period not to exceed the life expectancy of the participant. 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. B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF ACCOUNTING The financial statements of the Plan are maintained on the accrual basis of accounting. All the funds of the Plan are accounted for by Vanguard Fiduciary Trust Company (the Trustee). 9 15 American Greetings Retirement Profit Sharing and Savings Plan Notes to Financial Statements--Continued B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--CONTINUED INVESTMENT VALUATION AND INCOME RECOGNITION The Plan's investments are stated at fair value except for its deposits with an insurance company (see below). 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 the Plan's 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 notes receivable are valued at their outstanding balances, which approximate fair value. The value of deposits with an insurance company represents contributions made to deposit contracts plus interest at the contract rate, less funds transferred to the Trustee to pay retirement benefits and the insurance companies' administrative expenses. The cost of the deposits approximate their 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. Capital gain distributions are included in dividend income. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. 10 16 American Greetings Retirement Profit Sharing and Savings Plan Notes to Financial Statements--Continued C. INVESTMENTS 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 1997 1996 ----------------------------- Vanguard Index Trust-500 Portfolio $140,532,689 $ 94,080,769 Vanguard/PRIMECAP Fund 152,439,572 99,286,904 Vanguard/Wellington Fund 50,755,741 38,026,710 Vanguard Money Market Reserves- Prime Portfolio 39,623,175 42,808,043 Bond Index/IC Fund 150,615,489 162,992,325 Common Stock of American Greetings Corporation 38,448,858 31,785,930
During the years ended December 31, 1997 and 1996, the Plan's investments (including investments bought, sold and held during the year) appreciated (depreciated) in fair value as follows:
1997 1996 ----------------------------- Investments at fair value as determined by quoted market price: Vanguard Index Trust-500 Portfolio $ 30,919,973 $ 15,045,831 Vanguard/PRIMECAP Fund 33,174,176 12,500,466 Vanguard/Wellington Fund 4,975,296 2,281,322 Bond Index/IC Fund 3,910,941 (4,715,088) Vanguard/Windsor II 2,981,694 909,756 Vanguard/Wellesley Income Fund 188,228 8,233 Vanguard International Growth Portfolio (56,611) 315,267 Common Stock of American Greetings Corporation 11,183,499 853,481 ----------------------------- $ 87,277,196 $ 27,199,268 ============================
11 17 American Greetings Retirement Profit Sharing and Savings Plan Notes to Financial Statements--Continued D. INCOME TAX STATUS The Internal Revenue Service has issued a favorable determination letter indicating that the Plan qualifies under Section 401(a) of the Internal Revenue Code (the "Code") and, therefore, the related trust is not subject to tax under present income tax laws. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification. The Plan's Administrative Committee is not aware of any course of action or series of events that might adversely affect the Plan's qualified status. The tax exempt status of the Plan does not apply to the taxability of distributions to participants under the Plan. E. TRANSACTIONS WITH PARTIES-IN-INTEREST The Plan held 34,737 Class A shares and 950,000 Class B shares of American Greetings Corporation common stock at December 31, 1997 (79,859 and 1,040,350 shares, respectively, at December 31, 1996). Class B shares are not publicly traded. The Plan invests in shares of mutual funds managed by an affiliate of the Trustee. Accounting and legal 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. F. NUMBER OF PARTICIPANTS (UNAUDITED) The following are the number of participants contributing to the Plan's investment options:
DECEMBER 31 1997 1996 ------------------- Growth and Income Stock Fund--Index Trust 6,250 5,892 Growth and Income Stock Fund--Windsor II 1,486 825 Growth Stock Fund (PRIMECAP Fund) 6,328 5,999 Balanced Fund (Stocks and Bonds)--Wellington 2,475 2,171 Balanced Fund (Stocks and Bonds)--Wellesley 382 182 Money Market Fund 2,017 1,825 Bond Index - Investment Contact Fund 5,993 7,201 International Stock Fund 800 593 Company Stock Fund 3,249 3,542
12 18 American Greetings Retirement Profit Sharing and Savings Plan Notes to Financial Statements--Continued F. NUMBER OF PARTICIPANTS (UNAUDITED) --CONTINUED The total number of participants in the Plan is less than the sum of the above number of participants because many are participating in more than one investment option. G. YEAR 2000 ISSUE (UNAUDITED) The Plan Sponsor (the Corporation) has developed a plan to modify its internal information technology to be ready for the year 2000 and has begun converting critical data processing systems. The project also includes determining whether third party service providers have reasonable plans in place to become year 2000 compliant. The Plan Sponsor currently expects the project to be substantially complete by early 1999. The Plan Sponsor does not expect this project to have a significant effect on plan operations. 13 19 American Greetings Retirement Profit Sharing and Savings Plan EIN: 34-0065325 Plan #001 Form 5500, Item 27a--Schedule of Assets Held for Investment Purposes December 31, 1997
Col. (b) Col. (c) Col. (d) Col. (e) Description of Investment Including Maturity Date, Identity of Issue, Borrower, Lessor or Rate of Interest, Similar Party Par or Maturity Value Cost Current Value - ------------------------------------------------------------------------------------------------------------------------------ SHARES IN REGISTERED INVESTMENT COMPANIES *Vanguard Index Trust--500 Portfolio 1,560,261 shares $ 87,003,696 $ 140,532,689 *Vanguard/PRIMECAP Fund 3,852,403 shares 98,373,791 152,439,572 *Vanguard/Wellington Fund 1,723,455 shares 41,997,654 50,755,741 *Vanguard Money Market Reserves Prime Portfolio 39,623,175 shares 39,623,175 39,623,175 *Bond Index/IC Fund 14,847,135 shares 142,585,151 150,615,489 *Vanguard/Windsor II 823,430 shares 20,755,393 23,566,591 *Vanguard/Wellesley Income Fund 225,060 shares 4,760,367 4,919,816 *Vanguard International Growth Portfolio 363,860 shares 6,027,888 5,963,670 ------------------------------------ Total shares in registered investment companies $ 441,127,115 $ 568,416,743 EMPLOYER-RELATED INVESTMENTS *American Greetings Corp. Class A Common Stock 34,737 shares $ 1,318,543 $ 1,359,085 *American Greetings Corp. Class B Common Stock 950,000 shares 19,114,330 37,089,773 ------------------------------------ Total employer-related investments $ 20,432,873 $ 38,448,858 INSURANCE CONTRACTS Mutual Benefit Life GA-4207C 5.10%, Matures 12-31-99 $ 1,437,842 $ 1,437,842 Mutual Benefit Life GA-4207W 9.75%, Matures 12-31-99 775,006 775,006 ------------------------------------ TOTAL INSURANCE CONTRACTS $ 2,212,848 $ 2,212,848 *LOANS TO PARTICIPANTS 8% to 10%, Matures 1-5 years $ 1,306,194 $ 1,306,194 ------------------------------------ $ 465,079,030 $ 610,384,643 ====================================
* Indicates party-in-interest to the Plan. 14 20 American Greetings Retirement Profit Sharing and Savings Plan EIN: 34-0065325 Plan #001 Form 5500, Item 27d--Schedule of Reportable Transactions Year Ended December 31, 1997 CATEGORY (iii) - SERIES OF TRANSACTIONS IN EXCESS OF 5% OF PLAN ASSETS
Purchases Sales --------------------------------------------------------- Description No. Amount No. Amount Gain - ------------------------------------------------------------------------------------------------------------------------------- *Vanguard Index Trust-500 Portfolio 246 $37,053,076 241 $21,521,129 $4,681,321 *Vanguard/PRIMECAP Fund 242 40,556,490 239 20,580,333 5,407,624 *Vanguard/Wellington Fund 214 17,818,327 226 10,064,745 1,441,754 *Vanguard Money Market Reserves Prime Portfolio 241 34,054,004 248 37,238,872 - *Bond Index/IC Fund 246 28,363,120 249 44,851,666 1,062,092
There were no category (i), (ii) or (iv) reportable transactions during the year ended December 31, 1997. * Indicates party-in-interest to the Plan. 15 EX-23 2 EXHIBIT 23 1 Exhibit 23 Consent of Independent Auditors We consent to the incorporation by reference in the Registration Statement No. 33-45673 on Form S-8 pertaining to the American Greetings Retirement Profit Sharing and Savings Plan of our report dated June 19, 1998, with respect to the financial statements and supplemental schedules of the American Greetings Retirement Profit Sharing and Savings Plan included in this Annual Report on Form 11-K for the year ended December 31, 1997. Ernst & Young LLP Cleveland, Ohio June 19, 1998 -----END PRIVACY-ENHANCED MESSAGE-----