<PAGE> 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.
<PAGE> 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-
<PAGE> 3
EXHIBIT INDEX
Exhibit No.
23 Consent of Independent Auditors
<PAGE> 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
<PAGE> 5
American Greetings Retirement
Profit Sharing and Savings Plan
Audited Financial Statements
and Supplemental Schedules
Years Ended December 31, 1997 and 1996
CONTENTS
<TABLE>
<S> <C>
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
</TABLE>
<PAGE> 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
<PAGE> 7
American Greetings
Retirement Profit Sharing and Savings Plan
Statement of Net Assets Available for Benefits with Fund Information
December 31, 1997
<TABLE>
<CAPTION>
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
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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
======================================================================================
</TABLE>
See notes to financial statements.
2
<PAGE> 8
American Greetings
Retirement Profit Sharing and Savings Plan
Statement of Net Assets Available for Benefits with Fund Information
December 31, 1996
<TABLE>
<CAPTION>
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
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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
=================================================================================
</TABLE>
See notes to financial statements.
3
<PAGE> 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
<TABLE>
<CAPTION>
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
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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
===========================================================================
</TABLE>
See notes to financial statements.
4
<PAGE> 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
<TABLE>
<CAPTION>
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
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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
===========================================================================
</TABLE>
See notes to financial statements.
5
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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:
<TABLE>
<CAPTION>
DECEMBER 31
1997 1996
-----------------------------
<S> <C> <C>
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
</TABLE>
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:
<TABLE>
<CAPTION>
1997 1996
-----------------------------
<S> <C> <C>
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
============================
</TABLE>
11
<PAGE> 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:
<TABLE>
<CAPTION>
DECEMBER 31
1997 1996
-------------------
<S> <C> <C>
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
</TABLE>
12
<PAGE> 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
<PAGE> 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
<TABLE>
<CAPTION>
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
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
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
====================================
</TABLE>
* Indicates party-in-interest to the Plan.
14
<PAGE> 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
<TABLE>
<CAPTION>
Purchases Sales
---------------------------------------------------------
Description No. Amount No. Amount Gain
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
*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
</TABLE>
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
<PAGE> 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
