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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934

AMERICAN GREETINGS CORPORATION
(Exact name of registrant as specified in Charter)

Registrant’s telephone number, including area code (216) 252-7300

Securities registered pursuant to Section 12 (b) of the Act:

Class A Common Shares, Par Value $1.00

Securities registered pursuant to Section 12 (g) of the Act:

Class B Common Shares, Par Value $1.00

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES   þ   NO   o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ   

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

YES   þ   NO   o

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State the aggregate market value of the voting stock held by non-affiliates of the Registrant as of the last business day of the Registrant’s most recently completed second fiscal quarter, August 30, 2002 — $1,073,333,699

Number of shares outstanding as of April 28, 2003:

CLASS A COMMON — 61,309,505
CLASS B COMMON — 4,599,994

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement filed with the Securities and Exchange Commission on May 19, 2003 with respect to the 2003 Annual Meeting of Shareholders called for June 27, 2003, are incorporated by reference into Part III.

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PART I

Item 1. Business

American Greetings Corporation (“the Corporation”) and its subsidiaries operate predominantly in a single industry: the design, manufacture and sale of everyday and seasonal greeting cards and other social expression products. Greeting cards, gift wrap, paper party goods, candles, balloons, stationery and giftware are manufactured and /or sold in the United States by American Greetings Corporation, Gibson Greetings, Inc. and Plus Mark, Inc., in Canada by Carlton Cards Limited; in the United Kingdom by Carlton Cards Limited, Camden Graphics Group, Hanson White Ltd., Gibson Greetings International Limited, The Ink Group Publishers Ltd. (U.K.) and Carlton Cards Ltd. (Ireland); in Mexico by Carlton Mexico, S.A. de C.V. ; in Australia by John Sands (Australia) Ltd. and The Ink Group PTY Ltd.; in New Zealand by John Sands (N.Z.) Ltd. and The Ink Group NZ Ltd.; in South Africa by S.A. Greetings Corporation (PTY) Ltd.; and in Singapore, Hong Kong, China, and Malaysia by Memory Lane SDN BHD (85% owned). AmericanGreetings.com, Inc. (92% owned), markets e-mail greetings, personalized printable greeting cards and other social expression products through the Corporation’s websites www.americangreetings.com, www.bluemountain.com, www.egreetings.com and www.beatgreets.com; co-branded websites and on-line services. AmericanGreetings.com also provides design and verse content which is included in various CD-Rom software products for use on personal computers. Magnivision, Inc. produces and sells non-prescription reading glasses and eyeware accessories, and Learning Horizons distributes supplemental educational products. Carlton Cards Retail, Inc. owns and operates card and gift retail stores in the United States. Design licensing and character licensing are done by AGC, Inc. and Those Characters From Cleveland, Inc., respectively. A.G. Industries, Inc. manufactures custom display fixtures for the Corporation’s products and products of others. (Although other subsidiaries of American Greetings Corporation exist, they are either inactive, of minor importance or of a holding company nature.)

The Corporation’s fiscal year ends on February 28 or 29. References to a particular year refer to the fiscal year ending in February of that year. For example, 2003 refers to the year ended February 28, 2003. The Corporation’s AmericanGreetings.com, Inc. subsidiary is consolidated on a two-month lag corresponding with its fiscal year-end of December 31.

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The Corporation makes available, free of charge, on or through its investor relations Internet site, www.corporate.americangreetings.com, its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and, if applicable, amendments to those reports as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission (“SEC”). Copies of the Corporation’s filings with the SEC also can be obtained at the SEC’s Internet site, www.sec.gov. When new corporate governance rules proposed to the SEC by the New York Stock Exchange are approved by the SEC, the Corporation will adopt, in compliance with those rules, a code of business conduct and ethics for its directors, officers and other employees and a set of corporate governance principles that comply with those new rules. The Corporation also intends to adopt during the current fiscal year a code of ethics for its senior financial and executive officers. The Corporation will post these documents on its Internet site, along with the charters of (i) the Audit Committee, (ii) the Compensation and Management Development Committee and (iii) the Nominating and Governance Committee of its Board of Directors. Any changes to or waivers of the code of ethics provisions affecting senior financial and executive officers also will be promptly disclosed on the Corporation’s Internet site.

Many of the Corporation’s products are manufactured at common production facilities and marketed by a common sales force. Marketing and manufacturing functions in the United States and Canada are combined; dual priced cards are produced in the United States and distributed in both countries. Information concerning sales by major product classifications is included in Part II, Item 7. Additionally, information by geographic area is included in Note 15 to the Consolidated Financial Statements included in Part II, Item 8.

The Corporation’s products are primarily sold in about 125,000 retail outlets worldwide. In addition, the Corporation licenses its designs to various foreign licensees, so that in total, the Corporation’s products and designs are available in more than 70 nations around the world. The greeting card and gift wrap industry is intensely competitive. Competitive factors include quality, design, customer service and terms, which may include payments and other concessions to retail customers under long-term agreements. These agreements are discussed in greater detail below. There are an estimated 2,000 companies in this industry in the United States. The Corporation’s principal competitor is Hallmark Cards, Incorporated. Based upon its general familiarity with the greeting card and gift wrap industry and limited information as to its competitors, the Corporation believes that it is the second largest company in the industry and the largest publicly owned company in the industry. For information regarding the various business segments comprising the Corporation’s business, see the discussion in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, under the subheading “Segment Information”, and in Note 15 to the Consolidated Financial Statements included in Part II, Item 8.

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The Corporation’s unit sales of everyday cards increased approximately 5.6% in 2003 over 2002. Of the 5.6% increase in unit volume, approximately 4.0 percentage points is the result of scan-based trading buybacks and other initiatives in 2002 (see Part II, Item 7). The remaining 1.6 percentage-point increase in unit sales in 2003 is the result of strong acceptance of the Corporation’s value priced card products, partially offset by net store losses at two mass retail accounts and one supermarket chain. In 2002, after adjusting for the effects of the initiatives noted above, unit sales of everyday greeting cards declined 2.9% from 2001. Approximately half of the decline was the result of the Corporation completing its activities to reduce inventory levels at certain retailers while the remainder reflected the continuation of a slightly declining trend in everyday greeting card consumption.

The Corporation’s unit sales of seasonal cards, net of provisions for returns, decreased approximately 2.5% in 2003 from 2002. The net unit volume decrease is primarily the result of net store losses in the United States market. In 2002, unit sales of seasonal greeting cards increased approximately 8.7% from 2001.

Production of the Corporation’s products is generally on a level basis throughout the year. Everyday inventories remain relatively constant throughout the year, while seasonal inventories peak in advance of each major holiday season, including Christmas, Valentine’s Day, Easter, Mother’s Day, Father’s Day and Graduation. Payments for seasonal shipments are generally received during the month in which the major holiday occurs, or shortly thereafter. Extended payment terms may also be offered in response to competitive situations with individual customers. Two of the Corporation’s largest customers were converted to a scan-based trading model, and payments for both everyday and seasonal sales to those customers are received generally within 10 to 15 days of the product being sold by those customers at their retail locations. The Corporation and many of its competitors sell seasonal greeting cards with the right of return. Sales credits for non-seasonal product are issued at the Corporation’s sole discretion for damaged, obsolete and outdated products.

During the fiscal year, the Corporation experienced no difficulty in obtaining raw materials from suppliers.

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At February 28, 2003, the Corporation employed approximately 9,600 full-time employees and approximately 23,000 part-time employees which, when jointly considered, equate to approximately 21,100 full-time employees. Approximately 3,200 of the Corporation’s hourly plant employees are unionized, of which approximately 2,300 are covered by the following collective bargaining agreements:

Other locations with unions are the United Kingdom, Mexico, Australia, New Zealand, and South Africa. The Corporation’s headquarters and other manufacturing locations are not unionized. Labor relations at each location have generally been satisfactory.

The Corporation has a number of copyrights, patents and registered trademarks which are used in connection with its products. The Corporation’s designs and verses are protected by copyright. Although the licensing of copyrighted designs and trademarks produces additional revenue, in the opinion of the Corporation, the Corporation’s operations are not dependent upon any individual patent, trademark, copyright or intellectual property license. The collective value of the Corporation’s copyrights and trademarks is substantial, and the Corporation follows an aggressive policy of protecting its patents, copyrights and trademarks.

In 2003, the Corporation’s major channel of distribution continued to be mass retail (which is comprised of mass merchandisers, chain drug stores and supermarkets). Other major channels of distribution included card and gift shops, department stores, military post exchanges, variety stores and combo stores (stores combining food, general merchandise and drug items).

Net sales to the Corporation’s five largest customers, which include mass merchandisers and major drug stores, accounted for approximately 30%, 37% and 29% of net sales in 2003, 2002 and 2001, respectively. The decline from 2002 to 2003 was due in part to a decline in sales to a major customer that operated in Chapter 11 protection throughout 2003. Net sales to Wal-Mart Stores, Inc. accounted for approximately 11%, 12% and 10% of consolidated net sales in 2003, 2002 and 2001, respectively. No other customer accounted for 10% or more of the Corporation’s net sales.

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In the normal course of its business, the Corporation enters into agreements with certain customers for the supply of greeting cards and related products. The Corporation views the use of such agreements as advantageous in developing and maintaining business with its retail customers. Under these agreements, the customer typically receives from the Corporation a combination of cash payments, credits, discounts, allowances and other incentive considerations to be earned by the customer as product is purchased from the Corporation over the effective time period of the agreement to meet a minimum purchase volume commitment. The agreements are negotiated individually to meet competitive situations and, therefore, while some aspects of the agreements may be similar, important contractual terms vary. The agreements may or may not specify the Corporation as the sole supplier of social expression products to the customer. In the event an agreement is not completed, the Corporation has a claim for unearned advances under the agreement.

Although risk is inherent in the granting of advances, the Corporation subjects such customers to its normal credit review. In circumstances where the Corporation is aware of a particular customer’s inability to meet its performance obligation, the Corporation records a specific reserve to reduce the deferred cost asset to the Corporation’s estimate of the value of future cash flows based upon expected performance. These agreements are accounted for as deferred costs. Losses attributed to these specific events have historically not been material. The balances and movement of the valuation reserve accounts are disclosed on Schedule II of this Annual Report on Form 10-K. See Note 9 to the Consolidated Financial Statements in Part II, Item 8, and the discussion under the “Deferred Costs” heading in the “Critical Accounting Policies” section of Item 7 for further information and discussion of deferred costs.

The operations of the Corporation, like those of other companies in our industry, are subject to various federal, state and local environmental laws and regulations. These laws and regulations may give rise to claims, uncertainties or possible loss contingencies for future environmental remediation liabilities and costs. The Corporation has implemented various programs designed to protect the environment and comply with applicable environmental laws and regulations. The costs associated with these compliance and remediation efforts have not and are not expected to have a material adverse effect on the financial condition, cash flows, or operating results of the Corporation.

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Item 2. Properties

As of February 28, 2003, the Corporation owns or leases approximately 15.3 million square feet of plant, warehouse and office space, of which approximately 1.7 million square feet are leased. The Corporation believes its manufacturing and distribution facilities are well-maintained and are suitable and adequate, and have sufficient productive capacity, to meet its current needs.

The following table summarizes the principal plants and materially important physical properties of the Corporation:

*		- Indicates calendar year.
**		- Facility will be closed in the first quarter of fiscal 2004

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Item 3.  Legal Proceedings

This matter was previously disclosed in Form 10-K for the period ended February 29, 2000. In January 2000, Plus Mark, Inc. (“Plus Mark”), a wholly owned subsidiary of the Corporation, received a request from the United States Environmental Protection Agency (“US EPA”) in connection with the excavation of eight underground storage tanks at Plus Mark’s Afton, TN facility to perform initial site characterization for both soil and groundwater. After Plus Mark submitted the initial test results, the US EPA concluded that no further action was required regarding soil, but that further site characterization was required for groundwater. The US EPA transferred the matter to TDEC for administration. In November 2001, Plus Mark voluntarily entered into a Remediation Order with TDEC. A Remediation Plan addressing groundwater contamination, including a plan for off-site work, was approved by TDEC in June 2002.

This matter was previously disclosed in Form 10-K for the period ended February 29, 2000. In May 1998, TDEC informed Gibson Greetings, Inc. (“Gibson”), now a wholly owned subsidiary of the Corporation, that Cleo, a former subsidiary of Gibson, may be a potentially responsible party for the costs incurred by the State of Tennessee in remediating the Carl Wright Site. TDEC notified Gibson that storage drums recovered from the Site during clean up bore “Cleo Wrap” labels. Gibson had agreed to indemnify Cleo and its shareholder, CSS, against various environmental liabilities, in connection with the sale of Cleo to CSS. In November 2001, the Division of Superfund issued a second notice of assessment to “Cleo Wrap/Gibson Greetings” for $94,261.55, representing 8.3% of the clean-up costs assessed. The assessment was paid in January 2002. TDEC issued a 10% refund for timely payment and an order of contribution protection in June 2002.

This matter was previously disclosed in Form 10-K for the period ended February 28, 2001. In March 2001, the US EPA sent to the Corporation a General Notice of Potential Liability and Request for Information under CERCLA. The Notice stated the US EPA’s intent to conduct a remedial investigation/feasibility study at the Chemical Recovery Systems Site in Elyria, Ohio. The Corporation undertook a review of its records. The alleged shipments to this Site occurred in 1978. The Corporation is part of the de minimus contributor group. In January 2003, the Corporation settled with the US EPA for an amount not material to the financial statements of the Corporation.

This matter was previously disclosed in Form 10-Q for the period ending August 31, 2002. Party Concepts, Inc. filed an Amended Statement of Claim and demand for arbitration (“Demand”) against Gibson Greetings, Inc., alleging breach of the Supply Agreement between the parties dated as of September 1, 1998. Party Concepts, formerly known as The Paper Factory of Wisconsin, Inc., is a national retail chain selling party goods, greetings cards and related products at discount prices. Party Concepts had filed for Chapter 11 bankruptcy protection in August 2001 and has since emerged from bankruptcy. After discovery began but before the arbitration hearing date, the parties settled the arbitration dispute for an amount not material to the financial statements of the Corporation. The settlement was approved in March 2003 by the bankruptcy court in Party Concepts’ Chapter 11 bankruptcy.

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Executive Officers of the Registrant

The following is a list of the Corporation’s executive officers, their ages as of April 30, 2003, their positions and offices, and number of years in executive office:

Morry Weiss and Erwin Weiss are brothers. Jeffrey M. Weiss and Zev Weiss are the sons of Morry Weiss. The Board of Directors annually elects all executive officers; however, executive officers are subject to removal, with or without cause, at any time; provided, however, that the removal of James C. Spira, William R. Mason or Erwin Weiss would be subject to the terms of his respective employment agreement.

Effective June 1, 2003, Morry Weiss will relinquish his role as Chief Executive Officer but will remain Chairman of the board. James C. Spira will retire from the Corporation but will continue as a member of the Board of Directors and as an advisor to management. Zev Weiss will become Chief Executive Officer of the Corporation, and Jeffrey Weiss will become President and Chief Operating Officer of the Corporation. On that same date, Zev Weiss and Jeffrey Weiss will be appointed to the Board of Directors of the Corporation.

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All of the executive officers listed above have served in the capacity shown or similar capacities with the Corporation (or major subsidiary) over the past five years, with the following exceptions.

•		James C. Spira was a management consultant with several firms. He has served on the Board of Directors of the Corporation since 1998. He was appointed Vice Chairman of the Corporation in June 2000 and President and Chief Operating Officer of the Corporation in March 2001.
•		Zev Weiss was Regional Sales Director for the Corporation’s Carlton Cards Retail, Inc., unit from July 1994 to May 1995; Regional Sales Manager for the Corporation’s U.S. Greeting Card Division from May 1995 to May 1997; Executive Director of National Accounts for the Corporation’s U.S. Greeting Card Division from May 1997 until March 2000; Vice President, Strategic Business Units from March 2000 until March 2001; and Senior Vice President from March 2001 until becoming Executive Vice President in December 2001.
•		David R. Beittel was Vice President, Creative Visual Design of the Corporation’s Carlton Cards Retail, Inc. unit from August 1993 until April 1995; Executive Director, Product Management of the Corporation from April 1995 until January 1997; and Vice President, Creative of the Corporation from January 1997 until becoming Senior Vice President in April 2001.
•		Michael L. Goulder was a Vice President in the management consulting firm of Booz Allen Hamilton from October 1998 until September 2002. He became Senior Vice President, Executive Operations Officer of the Corporation in November 2002.
•		Pamela L. Linton was Senior Vice President, Global Human Resources of Amway Corporation from 1997 until 2000. She became Senior Vice President, Human Resources of the Corporation in June 2001.
•		Robert P. Ryder was Vice President and Chief Financial Officer of PepsiCo’s European Developing Markets, in London from 1995 to 1998 and Vice President and Controller for PepsiCo’s Frito-Lay North American division from 1998 to 2002. He became Senior Vice President and Chief Financial Officer of the Corporation in September 2002.
•		Steven S. Willensky was President of Medex, a subsidiary of The Furon Company, from 1997 to 2000 and President and Chief Executive Officer of Westec Interactive from 2000 to 2002. He became Senior Vice President, Executive Sales and Marketing Officer of the Corporation in September 2002.
•		Joseph B. Cipollone was Director, Corporate Financial Planning of the Corporation from July 1994 until December 1997; and Executive Director, International Finance of the Corporation from December 1997 until becoming Vice President and Corporate Controller in April 2001.

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•

Stephen J. Smith was Treasurer and Officer from 1998 to 1999 and Vice President, Treasurer and Assistant Secretary in 1999 of Insilco Holding Company. He was Vice President and Treasurer of General Cable Corporation from 1999 to 2002. He became Vice President and Treasurer of the Corporation in April 2003.

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PART II

Item 5. Market for the Registrant’s Common Equity and Related Stockholder Matters

(a) Market Information

The Corporation’s Class A common stock is listed on the New York Stock Exchange under the symbol AM. The high and low stock prices, as reported in the New York Stock Exchange listing, for the years ended February 28, 2003 and 2002, were:

National City Bank, Cleveland, Ohio, is the Corporation’s registrar and transfer agent. There is no public market for the Class B Common Shares of the Corporation. Pursuant to the Corporation’s Amended Articles of Incorporation, a holder of Class B Common Shares may not transfer such Class B Common Shares (except to permitted transferees, a group that generally includes members of the holder’s extended family, family trusts and charities) unless such holder first offers such shares to the Corporation for purchase at the most recent closing price for the Corporation’s Class A Common Shares. If the Corporation does not purchase such Class B Common Shares, the holder must convert such shares, on a share for share basis, into Class A Common Shares prior to any transfer.

(b) Shareholders

At February 28, 2003, there were approximately 30,000 holders of Class A Common Shares and 184 holders of Class B Common Shares of record and individual participants in security position listings.

(c) Cash Dividends

On August 9, 2001, the Corporation entered into a new $350,000 senior secured credit facility that was amended to $320,000 on July 22, 2002. The credit facility restricts the Corporation’s ability to incur additional indebtedness and to engage in acquisitions of other businesses and entities and to pay shareholder dividends.

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Item 6. Selected Financial Data

Years ended February 28 or 29
Thousands of dollars except share and per share amounts