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

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

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

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 [X]  NO [   ]

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. [ X ]

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

YES [X]  NO [   ]

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 31, 2003 - $1,200,757,689

Number of shares outstanding as of April 26, 2004:

CLASS A COMMON – 63,435,573
CLASS B COMMON – 4,727,939

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the American Greetings Corporation Definitive Proxy Statement for the Annual Meeting of Shareholders, to be filed with the Securities and Exchange Commission within 120 days after the close of the registrant’s fiscal year (incorporated into Part III).

2

AMERICAN GREETINGS CORPORATION
INDEX

3

PART I

Item 1. Business

OVERVIEW

American Greetings Corporation and its subsidiaries (“the Corporation”) 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., Plus Mark, Inc., and Carlton Cards Retail, Inc.; in Canada by Carlton Cards Limited; in the United Kingdom by Carlton Cards Limited (U.K.), Camden Graphics Group, UKG Specialty Products 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.; and in South Africa by S.A. Greetings Corporation (PTY) Ltd.; AmericanGreetings.com, Inc. (92% owned by the Corporation) markets e-mail greetings, personalized printable greeting cards and other social expression products through the Corporation’s Web sites www.americangreetings.com, www.bluemountain.com, www.egreetings.com and www.beatgreets.com; co-branded Web sites 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 eyewear accessories, and Learning Horizons, Inc. distributes supplemental educational products. Design licensing and character licensing are done by A.G.C. 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.

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, 2004 refers to the year ended February 29, 2004. The Corporation’s AmericanGreetings.com, Inc. subsidiary is consolidated on a two-month lag corresponding with its fiscal year-end of December 31.

BUSINESS STRATEGY

In 2004, American Greetings focused primarily on improving its core greeting card business by continuing its supply chain transformation, an initiative designed to improve the way it develops, manufactures, distributes and services its products. The Corporation anticipates that this initiative, which it introduced in February 2003, will result in substantial annual benefits by the end of 2005. This initiative was substantially on track to realize the anticipated benefits at the end of 2004.

In addition to the transformation of its supply chain, three other initiatives that the Corporation introduced one year ago – category innovation, strategic account management, human capital development – will continue to provide focus for the Corporation’s efforts throughout 2005. Category innovation will focus on driving improvements in the core greeting card business, extending the Corporation’s existing competencies and evolving the Corporation’s product line beyond the core greeting card business to create new opportunities. Strategic account management will continue to focus on the most efficient alignment of the Corporation’s resources with the differentiated needs of customer accounts and their consumers. Finally, human capital development will entail the continued training and development of associates in alignment with the Corporation’s operating objectives.

4

PRODUCTS

The Corporation creates, manufactures and distributes social expression products including greeting cards, gift wrap, party goods, calendars, candles, balloons, and stationery as well as non-prescription reading glasses, educational products and custom display fixtures. The Corporation’s major domestic greeting card brands are American Greetings, Carlton Cards, and Gibson. Online greeting card offerings and other digital content are available through the Corporation’s subsidiary, AmericanGreetings.com. Information concerning sales by major product classifications is included in Part II, Item 7.

BUSINESS SEGMENTS

At February 29, 2004, the Corporation operated in four business segments: Social Expression Products, Retail Operations, AmericanGreetings.com and non-reportable operating segments. 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.

CONCENTRATION OF CREDIT RISKS

Net sales to the Corporation’s five largest customers, which include mass merchandisers and major drug stores, accounted for approximately 31%, 30% and 37% of net sales in 2004, 2003 and 2002, 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 12%, 11% and 12% of net sales in 2004, 2003 and 2002, respectively. No other customer accounted for 10% or more of the Corporation’s net sales.

CONSUMERS

Women purchase 89% of all greeting cards sold. The median age of the Corporation’s consumers is 54. Women over the age of 35 account for more than 85% of all greeting cards sold. The average household income of greeting card buyers is about $35,000 per year. The average American household purchases about 16 greeting cards per year.

COMPETITION

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, Inc. 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 greeting card company.

5

PRODUCTION AND DISTRIBUTION

In 2004, 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). The Corporation services more than 70,000 retail stores in the United States and more than 125,000 outlets worldwide.

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. Additionally, information by geographic area is included in Note 15 to the Consolidated Financial Statements included in Part II, Item 8.

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. In 2003, 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. Information regarding the return of product is included in Note 1 to the Consolidated Financial Statements included in Part II, Item 8.

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

TRADEMARKS AND INTELLECTUAL PROPERTY RIGHTS

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.

6

EMPLOYEES

At February 29, 2004, the Corporation employed approximately 9,800 full-time employees and approximately 21,000 part-time employees which, when jointly considered, equate to approximately 20,300 full-time equivalent 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.

UNCERTAINTY OF FORWARD-LOOKING STATEMENTS

The statements contained in this report that are not historical facts are forward-looking statements. Actual results may differ materially from those projected in the forward-looking statements. Forward-looking statements involve risks and uncertainties, including but not limited to: retail bankruptcies and consolidations, successful integration of acquisitions, successful transition of management, a weak retail environment, consumer acceptance of products as priced and marketed, the impact of technology on core product sales, competitive terms of sale offered to customers, successfully implementing supply chain improvements and achieving projected cost savings from those improvements, and the Corporation’s ability to comply with its debt covenants. Risks pertaining specifically to AmericanGreetings.com include the viability of online advertising and subscriptions as revenue generators and the public’s acceptance of online greetings and other social expression products.

SUPPLY AGREEMENTS

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.

7

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.

ENVIRONMENTAL REGULATIONS

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.

8

Item 2. Properties

As of February 29, 2004, the Corporation owns or leases approximately 14.7 million square feet of plant, warehouse and office space, of which approximately 1.5 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.

9

10

11

Item 3. Legal Proceedings

		The Corporation is involved in certain legal actions and claims arising in the ordinary course of business. The Corporation, however, does not believe that any of the litigation in which it is currently engaged, either individually or in the aggregate, will have a material adverse effect on its business, consolidated financial position or results of operations.
1.		Flavia Group Inc. et al. v. Kinko’s, Inc.      US District Court, Central District of California – Case No. 03-1796 RMT
		This matter was previously disclosed in the Form 10-Q for the period ending August 31, 2003. There are no new material developments. In March 2003, Flavia Group filed suit against Kinko’s alleging copyright infringement and other claims with respect to Kinko’s use of certain Flavia designs, and seeking damages and injunctive relief. Kinko’s has demanded indemnification from Gibson Greetings, Inc. (“Gibson”), a wholly-owned subsidiary of the Corporation, under a Gibson-Kinko’s Vendor Agreement that expired in 2001. Gibson has denied any obligation to indemnify Kinko’s and in August 2003, Gibson and the Corporation intervened in the suit and filed a separate complaint against Kinko’s alleging copyright infringement. Kinko’s has stipulated to a preliminary injunction against further use of the designs in issue. Discovery is proceeding. Trial is set for August 2004. At this time, it is too early to determine the total amount of the Corporation’s potential liability in this matter; however, its liability, if any, is not expected to be material to its consolidated financial position or results of operations.
2.		149 New Montgomery LLC v. Egreetings Network, Inc.      San Francisco Superior Court – Case No. CGC 03427518
		In December 2003, the landlord, 149 New Montgomery, filed suit against Egreetings, alleging breach of lease. Egreetings has filed an answer denying liability and asserting affirmative defenses. It is too early to determine what, if any, amount may be due, above the lease payments already due and the Corporation’s liability, if any, is not expected to be material to its consolidated financial position or results of operations. Egreetings intends to fully defend this claim.

12

Item 4. Submission of Matters to Vote of Security Holders

None

Available Information

The Corporation makes available, free of charge, on or through its investor relations Web 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.

On or before the Corporation’s 2004 Annual Meeting of Shareholders, the Corporation’s Corporate Governance Guidelines, Code of Business Conduct and Ethics, and the charters of the Board’s Audit, Compensation and Management Development Committee and Nominating and Corporate Governance Committees will be posted on the Company’s website. Requests should be directed to Investor Relations.

Executive Officers of the Registrant

The following is a list of the Corporation’s executive officers, their ages as of April 30, 2004, 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 William R. Mason or Erwin Weiss would be subject to the terms of their respective employment agreement.

13

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:

•

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; Senior Vice President from March 2001 until December 2001; Executive Vice President from December 2001 until June 2003 when he was named Chief Executive Officer.

•

Jeffrey M. Weiss was Vice President, Materials Management of the Corporation’s U.S. Greeting Card Division from October 1996 until May 1997; Vice President, Product Management of the Corporation’s U.S. Greeting Card Division from May 1997 until January 1998; Senior Vice President from January 1998 until March 2000; and Executive Vice President, North American Greeting Card Division of the Company from March 2000 until June 2003 when he was named President and Chief Operating Officer.

•

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.

•

Mary Ann Corrigan-Davis was Vice President of Product Management from January 1988 until December 1991; President of Carlton Cards Retail from January 1992 until December 1995, and Senior Vice President of International Operations from May 1997 until becoming Senior Vice President of Business Innovation in October 2000.

•

Catherine M. Kilbane was a partner with Baker & Hostetler LLP. She became Senior Vice President, General Counsel and Secretary in October 2003.

•

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.

•

William R. Mason was Senior Vice President, General Sales Manager from June 1991 until becoming Senior Vice President, Wal-Mart Team in September 2002.

•

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.

14

•

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.

•

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.

15

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 each quarter of the years ended February 29, 2004 and February 28, 2003, 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.

The information regarding the Corporation’s equity compensations plan information required by Item 201(d) of Regulation S-K is set forth in Item 12 of this report.

(b) Shareholders

At February 29, 2004, there were approximately 45,600 holders of Class A Common Shares and 160 holders of Class B Common Shares of record and individual participants in security position listings.

(c) Cash Dividends

In April 2003, the Corporation amended its secured credit facility, which restricts the Corporation’s ability to incur additional indebtedness, to engage in acquisitions of other businesses and entities and to pay shareholder dividends. These restrictions are subject to customary baskets and financial covenant tests.

16

Item 6. Selected Financial Data

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