-----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, Is20QE4KENqUxIY9zLmrpr7SOW/5POLMKlmZZ604XX6fgOaYKCuiNOqgfEZCbVLZ unkovHoDOwOul7L9tbmEdQ== 0000950152-99-005712.txt : 19990630 0000950152-99-005712.hdr.sgml : 19990630 ACCESSION NUMBER: 0000950152-99-005712 CONFORMED SUBMISSION TYPE: 11-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990629 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: 99655684 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 CORPORATION 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, 1998. 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, 1998 and 1997. 2 2. Audited statements of changes in net assets available for benefits for the years ended December 31, 1998 and 1997. 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 29, 1999 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, 1998 and 1997 with Report of Independent Auditors 5 American Greetings Retirement Profit Sharing and Savings Plan Audited Financial Statements and Supplemental Schedules Years Ended December 31, 1998 and 1997 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.................... 4 Notes to Financial Statements ................................................ 6 SUPPLEMENTAL SCHEDULES Form 5500, Item 27a--Schedule of Assets Held for Investment Purposes.......... 12 Form 5500, Item 27d--Schedule of Reportable Transactions ..................... 13
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, 1998 and 1997, 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, 1998 and 1997, 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, 1998, and reportable transactions for the year then ended are presented for purpose of additional analysis and are not a required part of the financial statements but are 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. These supplemental schedules are the responsibility of the Plan's management. 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. Cleveland, Ohio May 28, 1999 1 7 American Greetings Retirement Profit Sharing and Savings Plan Statement of Net Assets Available for Benefits, With Fund Information December 31, 1998
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 ----------------------------------------------------------------------------------------- ASSETS Investments, at fair value: Shares in registered investment companies: Vanguard Index Trust-- 500 Portfolio $ 178,738,479 Vanguard/PRIMECAP Fund $ 176,764,139 Vanguard/Wellington Fund $ 56,270,038 Vanguard Money Market Reserves--Prime Portfolio $ 50,836,126 Bond Index/IC Fund Vanguard/Windsor II $ 28,109,908 Vanguard/Wellesley Income Fund $ 9,401,421 Vanguard International Growth Portfolio Common Stock of American Greetings Corporation Deposits with insurance companies Participant notes receivable ------------------------------------------------------------------------------------ Total investments 178,738,479 28,109,908 176,764,139 56,270,038 9,401,421 50,836,126 Receivables: Employer's contribution 5,937,070 1,110,249 6,446,039 1,967,918 320,434 3,246,860 Participants' contributions 289,975 71,932 301,960 102,385 22,326 86,006 ------------------------------------------------------------------------------------ Total receivables 6,227,045 1,182,181 6,747,999 2,070,303 342,760 3,332,866 ------------------------------------------------------------------------------------ Total assets 184,965,524 29,292,089 183,512,138 58,340,341 9,744,181 54,168,992 LIABILITIES Accrued liabilities ------------------------------------------------------------------------------------ NET ASSETS AVAILABLE FOR BENEFITS $ 184,965,524 $ 29,292,089 $ 183,512,138 $ 58,340,341 $ 9,744,181 $ 54,168,992 ==================================================================================== BOND INDEX/ INVESTMENT INTERNATIONAL COMPANY PARTICIPANT CONTRACT FUND STOCK FUND STOCK FUND LOAN FUND TOTAL ------------------------------------------------------------------------ ASSETS Investments, at fair value: Shares in registered investment companies: Vanguard Index Trust-- $ 178,738,479 500 Portfolio 176,764,139 Vanguard/PRIMECAP Fund 56,270,038 Vanguard/Wellington Fund Vanguard Money Market $ 52,867 50,888,993 Reserves--Prime Portfolio Bond Index/IC Fund $ 160,585,592 160,585,592 Vanguard/Windsor II 28,109,908 Vanguard/Wellesley Income 9,401,421 Fund Vanguard International $ 6,601,072 6,601,072 Growth Portfolio Common Stock of American $ 40,275,815 40,275,815 Greetings Corporation 2,370,196 2,370,196 Deposits with insurance company $ 1,361,841 1,361,841 Participant notes receivable ------------------------------------------------------------------------ 162,955,788 6,601,072 40,328,682 1,361,841 711,367,494 Total investments Receivables: 5,837,425 405,761 2,037,118 27,308,874 Employer's contribution 198,636 25,759 94,029 1,193,008 Participants' contributions ------------------------------------------------------------------------ 6,036,061 431,520 2,131,147 28,501,882 Total receivables ------------------------------------------------------------------------ 168,991,849 7,032,592 42,459,829 1,361,841 739,869,376 Total assets LIABILITIES 207,151 207,151 Accrued liabilities ------------------------------------------------------------------------ $ 168,784,698 $ 7,032,592 $ 42,459,829 $ 1,361,841 $ 739,662,225 NET ASSETS AVAILABLE FOR BENEFIT ========================================================================
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, 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 ------------------------------------------------------------------------------------ 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 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 39,473,598 Receivables: Employer's contribution 5,603,097 1,092,699 6,449,031 1,979,104 185,902 2,707,016 Participants' contributions 236,285 57,052 268,479 90,967 11,381 60,321 Other 9,056 1,211 11,231 2,798 144 2,595 ------------------------------------------------------------------------------------ Total receivables 5,848,438 1,150,962 6,728,741 2,072,869 197,427 2,769,932 ------------------------------------------------------------------------------------ Total assets 146,381,127 24,717,553 159,168,313 52,828,610 5,117,243 42,243,530 LIABILITIES Accrued liabilities ------------------------------------------------------------------------------------ NET ASSETS AVAILABLE FOR BENEFITS $ 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 ---------------------------------------------------------------------- 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 $ 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 companies 2,212,848 2,212,848 Participant notes receivable $ 1,306,194 1,306,194 ---------------------------------------------------------------------- Total investments 152,828,337 5,963,670 38,598,435 1,306,194 610,384,643 Receivables: Employer's contribution 6,299,284 420,844 2,023,706 26,760,683 Participants' contributions 175,243 25,295 81,319 1,006,342 Other 7,535 900 3,200 38,670 ---------------------------------------------------------------------- Total receivables 6,482,062 447,039 2,108,225 27,805,695 ---------------------------------------------------------------------- Total assets 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 $ 158,998,503 $ 6,410,709 $ 40,577,264 $ 1,306,194 $ 637,749,046 ======================================================================
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, 1998
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 -------------------------------------------------------------------------------- ADDITIONS TO NET ASSETS ATTRIBUTED TO: Net appreciation (depreciation) in fair value of investments $ 36,741,031 $ 684,315 $ 29,288,360 $ (199,965) $ (1,032) Interest and dividend income 2,767,271 2,889,120 6,855,415 6,276,979 794,855 Dividends from American Greetings Corporation common stock Contributions: Participants 3,943,268 1,044,436 4,338,893 1,481,659 245,375 Rollover 304,397 178,936 257,072 30,915 83,765 Employer 5,936,967 1,110,229 6,445,921 1,967,882 320,431 -------------------------------------------------------------------------------- Total additions 49,692,934 5,907,036 47,185,661 9,557,470 1,443,394 DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO: Benefits paid to participants 9,531,566 1,747,792 9,872,130 3,232,673 203,063 Administrative expenses 100 230 1,670 800 110 -------------------------------------------------------------------------------- Total deductions 9,531,666 1,748,022 9,873,800 3,233,473 203,173 -------------------------------------------------------------------------------- Net increase (decrease) prior to interfund transfers 40,161,268 4,159,014 37,311,861 6,323,997 1,240,221 Interfund transfers--net (1,576,871) 415,522 (12,968,036) (812,266) 3,386,717 -------------------------------------------------------------------------------- Net increase 38,584,397 4,574,536 24,343,825 5,511,731 4,626,938 Net assets available for benefits at beginning of year 146,381,127 24,717,553 159,168,313 52,828,610 5,117,243 -------------------------------------------------------------------------------- NET ASSETS AVAILABLE FOR BENEFITS AT END OF YEAR $ 184,965,524 $ 29,292,089 $ 183,512,138 $ 58,340,341 $ 9,744,181 ================================================================================
MONEY BOND INDEX/ MARKET INVESTMENT INTERNATIONAL COMPANY PARTICIPANT FUND CONTRACT FUND STOCK FUND STOCK FUND LOAN FUND TOTAL ---------------------------------------------------------------------------------------- ADDITIONS TO NET ASSETS ATTRIBUTED TO: Net appreciation (depreciation) in fair value of investments $ 3,217,465 $ 766,368 $ 1,726,521 $ 72,223,063 Interest and dividend income $ 2,285,691 9,700,446 134,429 9,945 $ 103,133 31,817,284 Dividends from American Greetings Corporation common stock 738,455 738,455 Contributions: Participants 1,115,055 2,659,930 401,403 1,270,316 16,500,335 Rollover 172,404 3,585 72,362 20,694 1,124,130 Employer 3,247,301 5,837,309 405,753 2,037,081 27,308,874 ---------------------------------------------------------------------------------------- Total additions 6,820,451 21,418,735 1,780,315 5,803,012 103,133 149,712,141 DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO: Benefits paid to participants 6,355,098 13,357,664 510,502 2,805,281 136,030 47,751,799 Administrative expenses 500 90 43,663 47,163 ---------------------------------------------------------------------------------------- Total deductions 6,355,598 13,357,664 510,592 2,848,944 136,030 47,798,962 ---------------------------------------------------------------------------------------- Net increase (decrease) prior to interfund transfers 464,853 8,061,071 1,269,723 2,954,068 (32,897) 101,913,179 Interfund transfers--net 11,460,609 1,725,124 (647,840) (1,071,503) 88,544 - ---------------------------------------------------------------------------------------- Net increase 11,925,462 9,786,195 621,883 1,882,565 55,647 101,913,179 Net assets available for benefits at beginning of year 42,243,530 158,998,503 6,410,709 40,577,264 1,306,194 637,749,046 ---------------------------------------------------------------------------------------- NET ASSETS AVAILABLE FOR BENEFITS AT END OF YEAR $ 54,168,992 $ 168,784,698 $ 7,032,592 $ 42,459,829 $ 1,361,841 $ 739,662,225 ========================================================================================
See notes to financial statements. 5 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, 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 transfers 37,310,559 6,145,187 42,966,059 10,229,790 803,209 1,171,822 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. 5 11 American Greetings Retirement Profit Sharing and Savings Plan Notes to Financial Statements Years Ended December 31, 1998 and 1997 A. 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, 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 1998 or 1997 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 AND VESTING 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 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 vested 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. 7 13 American Greetings Retirement Profit Sharing and Savings Plan Notes to Financial Statements--Continued A. DESCRIPTION OF THE PLAN--CONTINUED 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 ACCOUNTING POLICIES 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 loans 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 Vanguard Fiduciary Trust Company (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. USE OF ESTIMATES The preparation of financial statements in conformity with 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. 8 14 C. 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 1998 1997 ------------------------------- Vanguard Index Trust--500 Portfolio $ 178,738,479 $ 140,532,689 Vanguard/PRIMECAP Fund 176,764,139 152,439,572 Vanguard/Wellington Fund 56,270,038 50,755,741 Vanguard Money Market Reserves-- Prime Portfolio 50,888,993 39,623,175 Bond Index/IC Fund 160,585,592 150,615,489 Common Stock of American Greetings Corporation 40,275,815 38,448,858
During the years ended December 31, 1998 and 1997, the Plan's investments (including investments bought, sold and held during the year) appreciated (depreciated) in fair value as follows:
1998 1997 ----------------------------- Investments at fair value as determined by quoted market price: Vanguard Index Trust--500 Portfolio $ 36,741,031 $ 30,919,973 Vanguard/PRIMECAP Fund 29,288,360 33,174,176 Vanguard/Wellington Fund (199,965) 4,975,296 Bond Index/IC Fund 3,217,465 3,910,941 Vanguard/Windsor II 684,315 2,981,694 Vanguard/Wellesley Income Fund (1,032) 188,228 Vanguard International Growth Portfolio 766,368 (56,611) Common Stock of American Greetings Corporation 1,726,521 11,183,499 ------------------------------- $ 72,223,063 $ 87,277,196 ===============================
9 15 American Greetings Retirement Profit Sharing and Savings Plan Notes to Financial Statements--Continued D. INCOME TAX STATUS The Plan has received a determination letter from the Internal Revenue Service dated August 24, 1995, stating that the Plan is 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 believes the Plan is being operated in compliance with the applicable requirements of the Code and, therefore, believes that the Plan is qualified and the related trust is tax exempt. E. TRANSACTIONS WITH PARTIES-IN-INTEREST The Plan held 77,418 Class A shares and 900,000 Class B shares of American Greetings Corporation common stock at December 31, 1998 (34,737 and 950,000 shares, respectively, at December 31, 1997). The Plan received dividends from the Corporation's stock of $738,455 and $731,832 in 1998 and 1997, respectively. 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. F. NUMBER OF PARTICIPANTS (UNAUDITED) The following are the number of participants contributing to the Plan's investment options:
DECEMBER 31 1998 1997 -------------------- Growth and Income Stock Fund--Index Trust 6,230 6,250 Growth and Income Stock Fund--Windsor II 1,726 1,486 Growth Stock Fund (PRIMECAP Fund) 6,116 6,328 Balanced Fund (Stocks and Bonds)--Wellington 2,553 2,475 Balanced Fund (Stocks and Bonds)--Wellesley 584 382 Money Market Fund 2,268 2,017 Bond Index--Investment Contact Fund 5,522 5,993
10 16 American Greetings Retirement Profit Sharing and Savings Plan Notes to Financial Statements--Continued
International Stock Fund 801 800 Company Stock Fund 3,244 3,249
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 has determined that it will be necessary to take certain steps in order to ensure that the Plan's information systems are prepared to handle year 2000 dates. The Plan Sponsor is taking a two phase approach. The first phase addresses internal systems that must be modified or replaced to function properly. Both internal and external resources are being utilized to replace or modify existing software applications, and test the software and equipment for the year 2000 modifications. The Plan Sponsor anticipates substantially completing this phase of the project by August 1999. Costs associated with modifying software and equipment are not estimated to be significant and will be paid by the Plan Sponsor. For the second phase of the project, Plan management established formal communications with its third party service providers to determine that they have developed plans to address their own year 2000 problems as they relate to the Plan's operations. All third party service providers have indicated that they will be year 2000 compliant by early 1999. If modification of data processing systems of either the Plan, the Plan Sponsor, or its service providers are not completed timely, the year 2000 problem could have a material impact on the operations of the Plan. Although the Plan Sponsor is confident that all systems will be year 2000 ready, they have developed a contingency plan which is expected to be completed by November 1999. 11 17 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, 1998
DESCRIPTION OF INVESTMENT INCLUDING MATURITY DATE, IDENTITY OF ISSUE, BORROWER, LESSOR OR RATE OF INTEREST, SIMILAR PARTY PAR OR MATURITY VALUE COST CURRENT VALUE - ------------------------------------------------------------------------------------------------------------------------------- VALUE OF INTEREST IN REGISTERED INVESTMENT COMPANIES *Vanguard Index Trust--500 Portfolio 1,568,569 shares $ 98,017,890 $ 178,738,479 *Vanguard/PRIMECAP Fund 3,708,857 shares 102,957,606 176,764,139 *Vanguard/Wellington Fund 1,917,207 shares 49,255,609 56,270,038 *Vanguard Money Market Reserves Prime Portfolio 50,888,993 shares 50,888,993 50,888,993 *Bond Index/IC Fund 15,636,378 shares 160,585,592 160,585,592 *Vanguard/Windsor II 941,705 shares 25,488,168 28,109,908 *Vanguard/Wellesley Income Fund 425,019 shares 9,284,761 9,401,421 *Vanguard International Growth Portfolio 351,682 shares 6,026,767 6,601,072 ------------------------------------ Total value of interest in registered investment companies 502,505,386 667,359,642 EMPLOYER-RELATED INVESTMENTS *American Greetings Corp. Class A Common Stock 77,418 shares 3,441,473 3,178,977 *American Greetings Corp. Class B Common Stock 900,000 shares 18,108,312 37,096,838 ------------------------------------ Total employer-related investments 21,549,785 40,275,815 INSURANCE COMPANY GENERAL ACCOUNTS Mutual Benefit Life GA-4207C 5.10%, Matures 12-31-99 1,511,171 1,511,171 Mutual Benefit Life GA-4207W 14.4%, Matures 12-31-99 859,025 859,025 ------------------------------------ TOTAL INSURANCE COMPANY GENERAL ACCOUNTS 2,370,196 2,370,196 *LOANS TO PARTICIPANTS 8 % to 10%, Matures 1-5 years - 1,361,841 ------------------------------------ $ 526,253,367 $ 711,367,494 ====================================
* Indicates party-in-interest to the Plan. 12 18 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, 1998 CATEGORY (III)--SERIES OF TRANSACTIONS IN EXCESS OF 5% OF PLAN ASSETS
PURCHASES SALES ------------------------------------------------------------- DESCRIPTION OF ASSETS NO. AMOUNT NO. AMOUNT GAIN - ------------------------------------------------------------------------------------------------------------------ *Vanguard Index Trust-500 Portfolio 233 $ 35,084,950 244 $ 33,620,191 $ 9,549,435 *Vanguard Prime Money Market Fund 236 41,631,726 229 30,365,908 - *Vanguard/PRIMECAP Fund 220 31,266,343 246 36,230,136 9,547,609 *Bond Index/IC Fund 241 37,526,736 247 30,626,750 1,136,843
There were no category (i), (ii) or (iv) reportable transactions during the year ended December 31, 1998. * Indicates party-in-interest to the Plan. 13 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 May 28, 1999, 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, 1998. Ernst & Young LLP Cleveland, Ohio June 25, 1999 -----END PRIVACY-ENHANCED MESSAGE-----