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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1993
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ____________ to ____________.
Commission File Number: 0-1349
STANHOME INC.
(Exact name of registrant as specified in its charter)
Massachusetts 04-1864170
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
333 Western Avenue, Westfield, Massachusetts 01085
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (413) 562-3631
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, par value $.125 New York Stock Exchange
per share, together with the The Pacific Stock Exchange
Associated Common Stock Purchase Rights
("Common Stock")
Securities registered pursuant to Section 12(g) of the Act: None
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 (Section 229.405 of this chapter) 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]
State the aggregate market value of the voting stock held by non-affiliates
of the registrant: $616,067,303 on January 31, 1994.
The number of shares outstanding of the registrant's Common Stock as of
March 16, 1994 was 19,453,746 Shares.
Parts I, II, and IV of this Form 10-K incorporate by reference
certain information from the registrant's Annual Report to Stockholders for
fiscal year ended December 31, 1993. Part III of this Form 10-K
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incorporates by reference certain information from the registrant's
definitive Proxy Statement dated March 18, 1994, for its Annual Meeting of
Stockholders to be held on April 28, 1994.
P A R T I
ITEM 1. BUSINESS.
The Company and its subsidiaries are engaged in three primary lines
of business worldwide: (1) the design and sale through independent
retailers of collectible figurines and ornaments, action musicals, and
other giftware, (2) the direct response marketing and sale of collectible
plates and dolls, jewelry, and other giftware, and (3) the manufacture or
purchase, sale, and distribution through the direct selling method known as
the "Famous Stanley Hostess Party Plan" of home and personal care products
and giftware.
Giftware
The Company's Enesco Worldwide Giftware Group is led by Enesco
Corporation ("Enesco"), a subsidiary of the Company, with its headquarters,
principal showroom, and large warehouse and distribution center complex
located in Elk Grove Village, Illinois. Enesco is a leading importer and
distributor of creatively designed giftware items, including licensed lines
and collectibles. Its products include diverse lines of porcelain and cold
cast figurines, musicals and music boxes, dolls, ornaments, waterballs,
decoupage, miniatures, jack-in-the-boxes, tinware, gift bags, and other
giftware primarily produced by independent manufacturers in the Far East,
with production in some cases being exclusively devoted to Enesco products.
As part of a previously announced restructuring, Enesco has consolidated
the assets of its Tomorrow-Today Corporation subsidiary into its warehouse
and distribution facility, and is in the process of closing its retail
store at the Gurnee Mills Mall in Gurnee, Illinois and converting its
Australian operations into a distributorship. Enesco's domestic affiliates
within the Worldwide Giftware Group now include Sports Impressions, Inc.
which sells sports memorabilia and other licensed sports-oriented giftware,
and Via Vermont Ltd. which produces a line of etched glass and brass
ornaments, picture frames, jewelry boxes, and other giftware. Enesco
displays the Worldwide Giftware Group products continuously in ten
showrooms located in the United States as well as at periodic trade and
private shows held in major U.S. and foreign cities. These products are
marketed principally in the U.S. through more than 30,000 independent
retail outlets, including gift stores, greeting card shops, national
chains, mail order houses, and department stores, each of which is
typically serviced by representatives of one or both of Enesco's sales
organizations that are comprised of independent sales representatives who
cover established sales territories. Foreign affiliates and distributors
of the Worldwide Giftware Group are located in Australia, Brazil, Canada,
Germany, Hong Kong, Italy, Japan, The Netherlands, Taiwan, and the United
Kingdom.
The product lines of the Worldwide Giftware Group are based partially
on Enesco's collection of proprietary designs and partially on products
produced under license from independent creative designers. Many of its
products, whether proprietary or produced under license, are protected by
trademark and/or copyright registrations in the U.S. and many foreign
countries. Principal product trademarks of members of the Worldwide
Giftware Group include ENESCO, COUNTRY COUSINS, TREASURED MEMORIES, GROWING
UP, PINE HOLLOW, LAURA'S ATTIC, SUN SHELLS, ENESCO SMALL WONDERS, SMALL
WORLD OF MUSIC, ELUSIVE LEGEND, THE ENESCO TREASURY OF CHRISTMAS ORNAMENTS,
CHERISHED TEDDIES, MAGNAMARKER, VIA VERMONT, and SPORTS IMPRESSIONS. Among
its important licensed lines are PRECIOUS MOMENTS, GARFIELD, MEMORIES OF
YESTERDAY, LUCY AND ME, CALICO KITTENS, PADDINGTON BEAR, BARBIE,
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PENNYWHISTLE LANE, A CELEBRATION OF LIFE, SISTERS & BEST FRIENDS, MICKEY &
CO./DISNEY, THE NORTH POLE VILLAGE, COCA COLA, FROSTY THE SNOWMAN, CURRIER
& IVES, THE WORLD OF SINTERKLAAS, THE GOLDEN LEAGUE, SESAME STREET,
McDONALD'S, RUDOLPH THE RED NOSED REINDEER, IVORY CATS, CHERISHED TEDDIES,
MAUD HUMPHREY BOGART, BESSIE PEASE GUTMANN, LOUIS ICART, ROSE O'NEIL KEWPIE
COLLECTION, ELVIS PRESLEY, THE BEATLES, SATURDAY NIGHT LIVE, STAR TREK, and
WIZARD OF OZ.
While the development and innovation of new product designs lessens
Enesco's dependency on existing trademark or copyright protection, such
protection is important to the Company's business, and Enesco has
maintained an aggressive and visible program to identify and challenge
companies and individuals who infringe its copyrighted designs. The rights
with respect to the licensed lines are materially important to Enesco
because of the substantial volume of sales represented by these products,
especially the PRECIOUS MOMENTS product line which accounted for
approximately 24% of the Company's consolidated revenue during 1993.
The Enesco affiliate in Hong Kong, Enesco International (H.K.)
Limited, assists Enesco by overseeing the ordering and production of Enesco
products by independent manufacturers, which are located for the most part
in China, as well as in Hong Kong and Taiwan and, to a lesser extent, in
Indonesia and Thailand. In addition, this affiliate assists the Company's
direct selling operations in the U.S. and Europe by sourcing premium items
and giftware manufactured in the Far East. N.C. Cameron & Sons Limited, a
subsidiary of the Company and a member of the Worldwide Giftware Group
located in Ontario, Canada, sources its products not only through Enesco
International (H.K.) Limited but also from other Far Eastern, European, and
Canadian manufacturers. Enesco and its affiliates require all
manufacturing sources to comply with the Company's established quality
standards.
Competition in the giftware business in North America, Europe, and
the Far East is highly fragmented among a diversity of collectible and
giftware product categories. The principal factors affecting success in
the marketplace are originality of product design, quality, marketing
ability, customer service, and price. The Company believes that Enesco,
together with its U.S.-based affiliated companies, is a significant factor
in the U.S. giftware business among a small number of sizable, and largely
privately-held, competitors within the industry, which businesses include
Hallmark, Department 56, Lladro, Silvestri, and Schmid, among others. The
Worldwide Giftware Group sales tend to peak in the third and fourth
quarters. As of the end of 1993, the Worldwide Giftware Group had a
backlog of firm orders totaling $91,800,000, as compared to $93,000,000 as
of the end of 1992. The Company expects that substantially all of the
existing order backlog will be fulfilled during 1994. It is a standard
practice within the giftware industry, however, that orders are subject to
amendment or cancellation by customers prior to shipment. Because of the
multiplicity of external factors that can impact the status of unshipped
orders at any particular time, the comparison of backlog orders in a given
year with those at the same date in a prior year is not necessarily
indicative of sales performance for that year or for prospective sales
results in future years. Backlog orders can also be affected by various
programs employed by the Company to induce its customers to place orders
and accept shipments at specified times in the year. In addition, extended
credit and payment terms have been and will continue to be key marketing
tools. The Worldwide Giftware Group plans to utilize similar sales
promotions in 1994 to those it employed in 1993 and 1992.
Direct Response
The Company's Hamilton Worldwide Direct Response Group consists of
The Hamilton Collection, Inc. ("Hamilton"), a subsidiary of the Company,
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which has its headquarters and warehouse facilities located in
Jacksonville, Florida along with its parent, The Hamilton Group Limited,
Inc. Hamilton sells giftware and manufactured collectibles directly to
consumers through print advertising and direct mail marketing in the U.S.,
Canada, and the United Kingdom.
Hamilton's direct mail promotions and media advertisements offer
approximately sixty new products each year, primarily collectible plates,
dolls, and porcelain figurines. The artwork incorporated in these items
is, for the most part, licensed from well known artists and many feature
television and motion picture properties. In 1992, limited-edition dolls
accounted for 49% of Hamilton's worldwide sales. In 1993, however, its
collectible plates, hand-painted sculptures, and other non-doll product
categories grew substantially and accounted for over 62% of total sales of
the Worldwide Direct Response Group. The principal trademarks of Hamilton
include THE HAMILTON COLLECTION, RIVERSHORE, CHILDREN SERIES, and HAMLITE.
Most of Hamilton's products are advertised and sold as part of a
collection series. Generally, the consumer is offered the opportunity to
purchase a single limited-edition item for which the Company has planned or
anticipated related follow-up items. After the initial purchase, the
collector may be offered additional products over a period of time based
upon the same theme as the first product purchased. Advertising costs
total approximately 46% of all Worldwide Direct Response Group sales. A
key factor in achieving continued sales growth for Hamilton, especially in
the collectible plate category during 1993, has been the sale of product
with no down payment and, particularly in the case of dolls, on installment
payments. The collector may typically purchase a product with either
little or no down payment and a small number of interest-free installment
payments, depending on the price of the product.
Hamilton sources its products in the U.S., Great Britain, Germany,
Italy, and the Far East from numerous manufacturers that comply with the
Company's established quality standards. It has an expanding customer
mailing list of over 1,000,000 buyers and collectors. Hamilton's principal
licensed properties include: PRECIOUS MOMENTS, THE WIZARD OF OZ, CHERISHED
TEDDIES, STAR WARS, ELVIS PRESLEY, I LOVE LUCY, HONEYMOONERS, THE GIFTED
LINE, and STAR TREK. Well known artists include Chuck Ren, Chuck Dehaan,
Connie Walser Derek, Donald Zolan, Sandra Kuck, Thomas Blackshear, Jim
Lamb, Helen Kish, Samuel J. Butcher, and Ted Xaras.
The Worldwide Direct Response Group is faced with substantial
competition in all its North American and United Kingdom markets.
Competition in direct response marketing exists with respect to price,
product design and innovation, quality, advertising and marketing ability,
and customer service. The Company believes that Hamilton is a growing
factor in the U.S. among the handful of prominent giftware and manufactured
collectibles companies whose products are sold to the public through direct
response media and mail. These industry leaders include Danbury Mint,
Franklin Mint, Bradford Exchange, and Lenox Collection, most of which have
significantly larger sales volumes than Hamilton. The volume of sales of
the Worldwide Direct Response Group peaks in the third and fourth quarters.
Traditionally, mail order companies, such as Hamilton, have not been
obligated to collect states sales taxes on the sales of their products to
customers located in the various states unless they had a physical presence
sufficient to permit the state to impose this obligation under the
previously accepted guidelines established by the U.S. Supreme Court in the
National Bellas Hess case decided in 1967. Over the past few years various
states have sought to interpret these guidelines in such a way as to permit
them to impose the obligation to collect those taxes on mail order
companies based upon economic presence and in certain cases have even
enacted special legislation to such effect. As a result, these companies,
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including Hamilton, would face a significant administrative burden in
complying with the position of these states. Some states have also
asserted a retroactive liability for uncollected taxes for past periods.
In response to a particular challenge by the State of North Dakota, the
U.S. Supreme Court reviewed and upheld National Bellas Hess in 1992 based
on the Commerce Clause of the U.S. Constitution. However, in this new
decision the Court noted that its continuing application of the Commerce
Clause - to a situation which in fact went beyond that of National Bellas
Hess - could be modified by the U.S. Congress. In view of the subsequent
failure of an industry trade association to reach a practical resolution of
this matter with representatives of two state tax organizations, it is
generally expected that this issue will be pursued by both sides before the
U.S. Congress. In fact, legislation has been introduced in the U.S. Senate
to override the prior U.S. Supreme Court decisions.
Direct Selling
The Company's Stanhome Worldwide Direct Selling Group is composed of
direct selling operations conducted by subsidiaries of the Company in
France, Italy, Mexico, Puerto Rico, Slovenia, Spain, and Venezuela and the
Stanley Home Products Division in the United States. Some of these
operations manufacture, as well as distribute and sell, a broad line of
home care items and personal care and other products, including specialty
chemical products for household use, mops, brooms, brushes, and other
similar household cleaning equipment, pesticides for domestic use, air
deodorants, cosmetics and toiletries, and general giftware. The Company is
presently undergoing a major restructuring of its direct selling operations
which commenced in the latter half of 1993 and will result in the closing
and consolidation of several domestic and foreign facilities and
operations, including Germany and Portugal, and the elimination of
approximately ten percent of its worldwide work force upon its substantial
completion in 1994. Among the impacts were the termination of the Gift
Gallery Division in the U.S., the planned sale of certain Industrial
Division assets, and the planned cessation of manufacturing at the
Company's Easthampton, Massachusetts plant.
Worldwide sales of home care items and personal care products to
consumers generally result from the direct selling method known as the
"Famous Stanley Hostess Party Plan". Under this method a homemaker, or
hostess, invites her friends and neighbors to her home to view a
demonstration of Stanhome products by an independent Stanhome dealer, in
return for which she usually receives premium prizes or gifts. After the
demonstration, the dealer solicits orders from those present. In Italy and
France, the local affiliate of the Company sells the ordered products
directly to the consumer, pays a commission to the dealer on those sales,
and distributes the premiums to the hostess. In the U.S. and other
countries, the dealer purchases products at wholesale from the local
affiliate of the Company to fill her orders and resells the products at
retail to the consumers who placed the orders either at the home
demonstration or through catalog solicitations, door-to-door and other non-
party sales, or over the telephone. The dealer may also purchase premiums
from the local affiliate to distribute to the hostess as prizes or gifts
for hosting the demonstration. These premium prizes or gifts generally
consist of cookware and other useful or decorative household items that are
purchased from multiple independent suppliers located around the world.
The independent contractor relationship between the independent
Stanhome dealers and the Worldwide Direct Selling Group has proven
adaptable in most of the foreign jurisdictions in which the Company
conducts its direct selling business and in the past has been well
established in the U.S., where the Company has not been subject to either
social security or unemployment compensation tax with respect to them. In
some overseas countries, for example Italy, there is proposed legislation
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and government efforts to broaden social benefit coverage as well as the
prior imposition of a registration tax and minimum income taxes on
occupations including dealers, which affects the local affiliates'
recruiting and marketing approach and results, in some cases, in additional
expense for them. In Italy, the Company has previously reported that
independent dealers have received personal tax assessments in connection
with the distribution of hostess gifts as a part of the Stanhome Party Plan
Sales System. Some dealers have elected to use an amnesty settlement
procedure to resolve their pending claims, a procedure made available to
taxpayers by the Italian government for certain years up to and including
1990. Because of the effect on dealer recruitment and retention, Stanhome
Italy is continuing to assist dealers in the defense of their individual
tax claims by making payments of legal expenses, advancing amounts for tax
deposits, and making payments of settlements where this is more cost
effective than potential litigation costs. These payments have not been
material. This continued to be a problem for the Italian subsidiary in
1993 and into 1994.
Wholesale products sold in Mexico, Spain, and Venezuela are largely
supplied by manufacturing plants owned by subsidiaries operating in those
countries. The remaining foreign operations are supplied by these
manufacturing plants or by the Company's Easthampton, Massachusetts plant,
which is scheduled to discontinue its manufacturing operations by mid-1994
as part of the Company's worldwide restructuring effort, and, in France,
Italy, and Venezuela, partially by independent local manufacturing
licensees. Most wholesale products in the direct selling line sold in the
U.S. which have been manufactured in the Company's Easthampton,
Massachusetts plant are now planned to be produced by independent U.S.
third-party manufacturers. The remainder will continue to be purchased
from foreign subsidiary operations or from other independent sources. All
wholesale products sold in the U.S., and the premium items used as prizes
and gifts for U.S. hostesses, are distributed through four regional
Customer Care Centers.
The Worldwide Direct Selling Group also has arrangements with
independent distributors in Brazil, Canada, the Caribbean area, Chile,
Cyprus, Peru, Portugal, Singapore, and Thailand. The Company's products
are manufactured under license by its distributors in Brazil and Jamaica.
The direct selling operations of the Company are faced with
substantial competition in all markets in which they are engaged. In the
U.S., the Company has further segmented its market into Hispanic and Anglo
sales territories. The Hispanic territories traditionally cover the
southwestern U.S. border regions, southern Florida, New York City and other
metropolitan areas having high percentages of Hispanic population, which
have been actively growing sales territories for the Company's Hispanic
sales organization over the past few years. Competition in direct selling
worldwide exists not only with respect to price, warranty, product
performance, and parties or demonstrations, but also with respect to
obtaining and retaining an adequate number of dealers, which is of material
importance to the success of the direct selling business. Like other
direct selling companies, there is a substantial turnover in dealers,
particularly with respect to individuals who engage in this independent
business activity only on a part-time and occasional basis. The recruiting
process is therefore a continuous one. The retention of key sales
personnel is highly dependent on interpersonal relationships and loyalties
as well as on competitive remuneration systems.
While adequate figures are not available for precise comparisons, the
Company believes that the Worldwide Direct Selling Group is a major factor
outside the U.S. among the large group of companies whose products are sold
to the public via the party plan sales method in those principal foreign
markets where affiliates of the Worldwide Direct Selling Group are doing
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business. The Worldwide Direct Selling Group is a lesser factor in the
U.S. among those companies. The party plan companies form one part of the
larger market of all direct selling companies with similar products and
which compete in the recruitment of their sales forces. While there are
several, non-party plan direct selling companies whose worldwide sales are
much greater than the Company, the Company's direct selling subsidiaries
are among the market leading party plan businesses in each of Italy,
France, Spain, Slovenia, Mexico, and Venezuela. The direct selling
operations of the Company and its subsidiaries tend to have seasonal
characteristics with sales that peak in the fourth quarter and, to a lesser
degree, in the second quarter.
All products of the Worldwide Direct Selling Group, whether
manufactured by the Company's foreign subsidiaries, the Stanley Home
Products Division, or by contract manufacturers in the U.S. or abroad,
comply with quality standards established and enforced by the Company and
its subsidiaries. There are no significant problems in the availability of
raw materials, which are purchased from numerous suppliers and which will
be used by the Company's subsidiaries and independent third-party
manufacturers in manufacturing the line of wholesale products for the
Worldwide Direct Selling Group.
The Company's trademarks are generally protected by registrations in
the U.S. and foreign countries where its product line is marketed and by
registrations of its major trademarks in many other countries throughout
the world. A principal trademark is the STANHOME name and design. These
marks play a substantial role in the identification and acceptance of the
Company's products by consumers. The Company's direct selling business is
not materially dependent on patents or patent protection. Similarly, while
the Company owns a large number of formulae and regards many of its
manufacturing processes as secret, it does not believe that its business is
materially dependent upon the maintenance of secrecy with respect to such
formulae or processes.
Other Information
As of March 31, 1994, the Company will have discontinued the
manufacturing and distribution operations of its Industrial Division which
sold cleaning products for commercial use. These products were sold
directly to its customers in the food service, industrial, and
institutional fields, and also indirectly through independent distributors.
As part of the Company's worldwide restructuring, certain assets of the
Industrial Division are planned to be sold.
As of December 31, 1993, the Company and its U.S. subsidiaries,
including Enesco, Hamilton and their affiliates, employed approximately
1,760 persons, and there were approximately 37,900 Stanley dealers, group
leaders, and district managers and Enesco sales representatives engaged in
selling the Company's products in the U.S., all of whom are treated as
independent contractors. As of the same date, the Company's foreign
subsidiaries employed approximately 2,370 persons on a full-time basis.
There were approximately 49,800 Stanhome dealers engaged in direct selling
abroad at the end of 1993, most of whom are recognized as independent
contractors.
Over the years, there has been an ongoing issue in the U.S. as to the
correct classification of workers as employees or independent contractors,
with resulting tax and other legal consequences to the worker and company
involved. The U.S. Internal Revenue Service and Congress have expressed
renewed interest in this area in general, and some states have challenged
from time to time the classification of positions within the Company's
operating Groups. This area will in all likelihood receive increased
attention from the federal and state governments in the future.
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In addition to changes in political climate, foreign operations are
subject to certain other risks inherent in carrying on business abroad,
including the risk of foreign currency fluctuations and restraints,
different rates of inflation and economic growth, and U.S. and foreign
restrictions affecting international trade with, and investment and
operations in, various foreign countries. An example of such risk is the
ongoing economic and political turmoil engendered by the apparent
instability of the existing Italian government as a result of continuing
corruption probes into alleged kickback payments and illegal political
party financing schemes. Moreover, the Italian lire continued to devalue
against the U.S. dollar throughout the year and by approximately 19% in the
fourth quarter of 1993 as compared to the fourth quarter of 1992,
negatively impacting the financial results in the fourth quarter of the
Company's Italian subsidiary when stated in U.S. dollars. This foreign
currency fluctuation and Italy's unsettled political situation is
particularly important for the Company because its Italian subsidiary
accounted for approximately 38% of the Worldwide Direct Selling Group's
total 1993 sales and substantially all of the 1993 operating profits,
inclusive of the restructuring charges of the Worldwide Direct Selling
Group. In the case of both the Worldwide Giftware and Direct Response
Groups, while the vast majority of their respective total 1993 sales and
operating profits resulted from U.S. operations, similar risks associated
with foreign economic conditions exist because of the predominance of
foreign-sourced product in each of their product lines. Much of the
Worldwide Giftware Group, and a substantial portion of the Worldwide Direct
Response Group, lines are produced in the Far East. The last several years
have seen renewed interest by some U.S. government officials in the
imposition of trade sanctions, most notably increased tariffs, on imported
goods from countries located there, such as the People's Republic of China,
where many Enesco and Hamilton products originate.
For financial information about industry segments, including
financial information regarding foreign and domestic operations, see Note 5
of "Notes to Consolidated Financial Statements" included on pages 36 and 37
of the 1993 Annual Report to Stockholders, which is incorporated herein by
reference.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" commencing on page 17 of the 1993 Annual Report to
Stockholders, which is incorporated herein by reference, for a comparison
and discussion of the results of operations and operating profit from
foreign and domestic sources.
ITEM 2. PROPERTIES.
The principal physical properties of the Company and its subsidiaries
in the United States, all of which are owned unless otherwise noted,
consist of the following: Corporate Headquarters - 333 Western Avenue,
Westfield, Massachusetts; office, manufacturing, and warehouse facilities
in Easthampton, Massachusetts and four warehouse and distribution centers
situated across the United States for the direct selling business; and
headquarters, showroom, and distribution facilities for its Enesco giftware
business in Elk Grove Village, Illinois. Enesco also leases or maintains a
retail gift shop and showrooms in various other locations in the United
States for the display of its products. Via Vermont Ltd. leases office and
distribution facilities in Wilder, Vermont. The Hamilton Group Limited,
Inc. leases office headquarters, parking, and warehouse space in
Jacksonville, Florida.
The principal physical properties of the Company's direct selling
subsidiaries outside the U.S. consist of 8 major manufacturing and/or
distribution facilities located in France, Italy, Mexico, Puerto Rico,
Spain, and Venezuela. Two of these facilities are leased. In addition,
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the various foreign subsidiaries maintain numerous sales and administrative
offices as well as smaller distribution facilities, most of which are
leased. Except for Via Vermont, S.A. de C.V., which owns an assembly and
warehouse facility in San Miguel de Allende, Guanajuato, Mexico, all of the
foreign subsidiaries of the Company's Enesco Worldwide Giftware Group and
the Company's Hamilton Worldwide Direct Response Group lease their office
and warehouse space.
The Company's manufacturing plant in Easthampton, Massachusetts,
which is planned to discontinue its manufacturing operations by mid-1994,
and some of the foreign manufacturing plants have additional capacity
available. As part of the Company's worldwide restructuring, one former
U.S. warehouse and distribution center has been sold and one is planned to
be sold.
ITEM 3. LEGAL PROCEEDINGS.
There are various legal proceedings pending against the Company and
its subsidiaries which have arisen during the course of business. While
Management cannot predict the eventual outcome of these proceedings, it
believes that none of these proceedings will have a material adverse impact
upon the consolidated financial statements of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
Date First
Name Age Positions Elected
G. William Seawright 52 Director 3/08/90
President and Chief
Executive Officer 11/09/93
Member of the Executive
Committee 4/22/93
Prior to Mr. Seawright joining the Company in November, 1993, he was
President and Chief Executive Officer of The Paddington Corporation, an
importer of wines and spirits, in Fort Lee, New Jersey since 1990, after
having previously served as the President of Heublein International and a
Senior Vice President of Heublein, Inc. since 1986.
Alejandro Diaz 49 Director 4/28/88
Executive Vice President 8/31/93
Member of the Executive
Committee 4/28/88
Mr. Diaz resigned as President and Chief Executive Officer in August,
1993 after having served since August, 1990. He serves as President and
Chief Executive Officer of the Worldwide Direct Selling Group. He
previously served as Chief Operating Officer of the Company from April,
1989 to August, 1990, and as President of the International Division from
December, 1982 to April, 1988, being appointed Chief Executive Officer of
that Division in January, 1985.
Allan G. Keirstead 49 Director 4/25/85
Executive Vice President
and Chief Administrative
Officer 4/28/88
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Chief Financial Officer 4/28/83
Controller 12/02/81
Member of the Executive
Committee 4/25/85
Prior to Mr. Keirstead's election as Executive Vice President and
Chief Administrative Officer, he served as Financial Vice President from
January, 1983 to April, 1988. He served as Assistant Controller from
April, 1977 to December, 1981.
Eugene Freedman 69 Executive Vice President 4/28/88
Mr. Freedman previously served as a Vice President of the Company
from January, 1984 to April, 1988 and serves as President and Chief
Executive Officer of the Worldwide Giftware Group and President and Chief
Executive Officer of Enesco Corporation.
James P. Smith, Jr. 50 Executive Vice President 1/26/94
Mr. Smith previously served as Senior Vice President of the Company
from April, 1992 until January, 1994 and as a Vice President of the Company
from May, 1989 to April, 1992. He serves as President and Chief Executive
Officer of the Worldwide Direct Response Group and President and Chief
Executive Officer of The Hamilton Collection, Inc. Prior to Mr. Smith
joining the Company, he was the Chairman and Chief Executive Officer of The
Hamilton Group Limited, Inc. and its affiliated companies.
Bruce H. Wyatt 47 Vice President and
General Counsel 9/07/88
Clerk and Secretary 4/28/88
Prior to Mr. Wyatt's elections as Vice President and General Counsel,
and Clerk and Secretary, he served as Assistant General Counsel from April,
1985, Assistant Clerk from April, 1983, and Assistant Secretary from April,
1981.
Ronald R. Jalbert 55 Vice President 8/29/79
Mr. Jalbert joined the Company in August, 1979 as its Vice President
of Personnel and since April, 1982 he has served as Vice President, Human
Resources and Public Affairs.
Thomas E. Evangelista 44 Vice President 12/07/88
Prior to Mr. Evangelista joining the Company in December, 1988, he
was a Marketing Consultant for Marketing Corporation of America in
Westport, Connecticut where he focused on business development strategies
primarily for consumer products and services clients.
John W. Stillwaggon 46 Vice President 6/02/93
Mr. Stillwaggon joined the Company in March, 1993 and serves as the
Senior Vice President of The Americas, in the Worldwide Direct Selling
Group. Prior to Mr. Stillwaggon joining the Company, he was the owner and
President of Yankee Fundraising Inc., a fundraising franchise, in Darien,
Connecticut since 1990 and was Executive Vice President and acting General
Manager of Avon France during 1988 and 1989.
Carmen J. Mascaro 58 Treasurer 2/01/93
Prior to Mr. Mascaro's election as Treasurer, he served as Assistant
Treasurer from January, 1986 to February, 1993.
-10-
NOTE: All officers are elected for the ensuing year and until their
successors are duly elected and qualified.
P A R T II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
Information required by this item is set forth in the Sections
entitled "Financial Highlights" and "Stock Market, Dividend and
Shareholder Information" appearing on page 1 of the 1993 Annual Report to
Stockholders, and is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA.
Information required by this item is set forth in the Section
entitled "Financial Highlights Last Ten Years" appearing on pages 42 and
43 of the 1993 Annual Report to Stockholders, and is incorporated herein
by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION.
Information required by this item is set forth in the Section
entitled "Management's Discussion and Analysis of Financial Condition and
Results of Operations" appearing on pages 17 through 22 of the 1993 Annual
Report to Stockholders, and is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Information required by this item is set forth in the Report of
Independent Public Accountants and the Financial Statements together with
Notes appearing on pages 24 through 41 of the 1993 Annual Report to
Stockholders, and is incorporated herein by reference. Also incorporated
herein by reference are the Quarterly results (unaudited) during 1993,
1992 and 1991 set forth on page 23 of the 1993 Annual Report to
Stockholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
P A R T III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information required by this item regarding the directors of the
Company is set forth under the captions "Election of Directors" and
"Information as to Board of Directors and Nominees" in the Company's proxy
statement dated March 18, 1994, and is incorporated herein by reference.
Information required by this item regarding the executive officers of the
Company is included under a separate caption in Part I hereof, and is
incorporated herein by reference, in accordance with General Instruction
G(3) to Form 10-K and Instruction 3 to Item 401(b) of Regulation S-K.
ITEM 11. EXECUTIVE COMPENSATION.
Information required by this item is set forth under the captions
"Executive Compensation", "Compensation and Stock Option Committee Report
on Executive Compensation", and "Remuneration of Non-Employee Directors"
in the Company's proxy statement dated March 18, 1994, and is incorporated
herein by reference.
-11-
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information required by this item is set forth under the caption
"Voting Securities and Principal Holders Thereof" in the Company's proxy
statement dated March 18, 1994, and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information required by this item is set forth under the captions
"Compensation Committee Interlocks and Insider Participation" and "Certain
Relationships and Related Transactions" in the Company's proxy statement
dated March 18, 1994, and is incorporated herein by reference.
P A R T IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(1) and (2) Financial Statements and Schedules. The financial
statements and schedules required by this item are listed in the Index to
Financial Statements and Schedules of Stanhome Inc. on page 14 of this Form
10-K.
(a)(3) Exhibits. The exhibits required by this item are listed in
the Exhibit Index on pages 19 - 20 of this Form 10-K. The management
contracts and compensatory plans or arrangements required to be filed as an
exhibit to this Form 10-K are listed as Exhibits 10(a) to 10(r) in the
Exhibit Index.
(b) No reports on Form 8-K were filed by the Company during the
fourth quarter of 1993.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized, on the
29th day of March, 1994.
STANHOME INC.
(Registrant)
By: /s/ G. William Seawright
G. William Seawright
President and Chief Executive Officer
By: /s/ Allan G. Keirstead
Allan G. Keirstead
Executive Vice President,
Chief Administrative & Financial Officer
-12-
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below on the 29th day of March, 1994 by the
following persons on behalf of the registrant and in the capacities
indicated.
Signature Title
/s/ H. L. Tower *
H. L. Tower Director
/s/ Homer G. Perkins *
Homer G. Perkins Director
/s/ Alla O'Brien *
Alla O'Brien Director
/s/ Allan G. Keirstead
Allan G. Keirstead Director, Executive Vice
President, and Chief
Administrative & Financial
Officer
/s/ John F. Cauley, Jr. *
John F. Cauley, Jr. Director
/s/ Janet M. Clarke *
Janet M. Clarke Director
/s/ Alejandro Diaz *
Alejandro Diaz Director, Executive Vice
President
/s/ G. William Seawright
G. William Seawright Director, President, and
Chief Executive Officer
/s/ Thomas R. Horton *
Thomas R. Horton Director
/s/ Anne-Lee Verville *
Anne-Lee Verville Director
/s/ Judith R. Haberkorn *
Judith R. Haberkorn Director
*By: /s/ G. William Seawright
G. William Seawright
Attorney-In-Fact
-13-
STANHOME INC.
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS - Incorporated herein by reference
to "Report of Independent Public Accountants" on page 41 of Stanhome's
1993 Annual Report to Stockholders.
FINANCIAL STATEMENTS - All of which are incorporated herein by reference to
Stanhome's 1993 Annual Report to Stockholders.
Consolidated Balance Sheet - December 31, 1993 and 1992
Consolidated Statement of Income For the Years Ended December 31, 1993,
1992 and 1991
Consolidated Statement of Retained Earnings For the Years Ended
December 31, 1993, 1992 and 1991
Consolidated Statement of Cash Flows For the Years Ended December 31,
1993, 1992 and 1991
Notes to Consolidated Financial Statements - December 31, 1993, 1992
and 1991
Quarterly results (unaudited)
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES
SCHEDULES SUPPORTING FINANCIAL STATEMENTS:
Schedule
Number Description
VIII Valuation and Qualifying Accounts and Reserves For
the Three Years Ended December 31, 1993
IX Short-Term Borrowings For the Three Years Ended
December 31, 1993
X Supplementary Income Statement Information For the
Three Years Ended December 31, 1993
NOTES:
(a) All other schedules are not submitted because they are not
applicable, not required or because the required information is
included in the consolidated financial statements or notes
thereto.
(b) Individual financial statements of the Company have been
omitted since (1) consolidated statements of the Company and
its subsidiaries are filed and (2) the Company is primarily an
operating company and all subsidiaries included in the
consolidated financial statements filed are wholly-owned and do
not have a material amount of debt to outside persons.
-14-
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES
-----------------------------------------------------
To Stanhome Inc.:
We have audited, in accordance with generally accepted auditing
standards, the financial statements included in Stanhome Inc.'s annual
report to shareholders incorporated by reference in this Form 10-K, and
have issued our report thereon dated February 18, 1994. Our audit was made
for the purpose of forming an opinion on those statements taken as a whole.
The schedules listed in the accompanying index are the responsibility of
the company's management and are presented for purposes of complying with
the Securities and Exchange Commission's rules and are not part of the
basic financial statements. These schedules have been subjected to the
auditing procedures applied in the audit of the basic financial statements
and, in our opinion, fairly state in all material respects the financial
data required to be set forth therein in relation to the basic financial
statements taken as a whole.
/s/ Arthur Andersen & Co.
Hartford, Connecticut
February 18, 1994
-15-
SCHEDULE VIII
STANHOME INC.
-------------
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
----------------------------------------------
FOR THE THREE YEARS ENDED DECEMBER 31, 1993
--------------------------------------------
Column A Column B Column C Column D Column E
Additions
---------
Balance at Charged to Charged to Balance at
Beginning Costs and Other End of
Description of Period Expenses Accounts Deductions Period
----------- ---------- ---------- ---------- ---------- ----------
For the year ended December 31, 1991
- ------------------------------------
Reserves which are deducted in the
balance sheet from assets to which
they apply -
Allowance for doubtful accounts $ 8,040,517 $7,013,218 $299,642(a) $4,323,588 $11,029,789
=========== ========== ======== ========== ===========
Accumulated amortization of
other assets $12,703,504 $2,072,019 $ - $ 145,302 $14,630,221
=========== ========== ======== ========== ===========
Other reserves $ 970,027 $ 1,001,020
=========== ===========
For the year ended December 31, 1992
- ------------------------------------
Reserves which are deducted in the
balance sheet from assets to which
they apply -
Allowance for doubtful accounts $11,029,789 $8,452,492 $ - $7,077,330 $12,404,951
=========== ========== ======== ========== ===========
Accumulated amortization of
other assets $14,630,221 $2,215,827 $145,000(b) $ 108,116 $16,882,932
=========== ========== ======== ========== ===========
Other reserves $ 1,001,020 $ 576,998
=========== ===========
For the year ended December 31, 1993
- ------------------------------------
Reserves which are deducted in the
balance sheet from assets to which
they apply -
Allowance for doubtful accounts $12,404,951 $7,478,700 $ - $4,153,126 $15,730,525
=========== ========== ======== ========== ===========
Accumulated amortization of
other assets $16,882,932 $2,285,245 $ - $ 55,335 $19,112,842
=========== ========== ======== ========== ===========
Other reserves $ 576,998 $ 627,416
=========== ===========
Note:
(a) Represents recorded reserves at dates of acquisitions.
(b) Represents balance sheet reclassifications related to prior acquisitions.
-16-
SCHEDULE IX
STANHOME INC.
-------------
SHORT-TERM BORROWINGS
---------------------
FOR THE THREE YEARS ENDED DECEMBER 31, 1993
-------------------------------------------
Column A Column B Column C Column D Column E Column F
Weighted
Maximum Average Average
Weighted Amount Amount Interest
Category of Aggregate Balance at Average Outstanding Outstanding Rate
Short-Term End of Interest During the During the During the
Borrowings Period Rate Period Period Period
--------------------- ---------- -------- ----------- ----------- ----------
For the year ended December 31, 1991
- ------------------------------------
Bank $10,743,934 6.8% $52,253,518 $36,274,845 7.3%
For the year ended December 31, 1992
- -------------------------------------
Bank $ 1,158,549 11.9% $38,971,570 $24,677,505 6.1%
For the year ended December 31, 1993
- ------------------------------------
Bank $ 834,197 8.1% $21,396,858 $ 6,156,951 5.8%
The short-term borrowings represent corporate notes payable as well as notes
payable by international subsidiaries. The bank borrowings are under lines of
credit and credit arrangements. The average amounts outstanding and the
weighted average interest rates for the period are based on the average monthly
balances totaled and divided by twelve. Due to reclassifications made in 1993
to the prior years' financial statements, the information for 1992 and 1991 has
been adjusted to be comparable to 1993.
-17-
SCHEDULE X
STANHOME INC.
-------------
SUPPLEMENTARY INCOME STATEMENT INFORMATION
------------------------------------------
FOR THE THREE YEARS ENDED DECEMBER 31, 1993
-------------------------------------------
Column A Column B
Charged to Costs
and Expenses (a)
----------------
Item 1993 1992 1991
---- ----------- ----------- -----------
Advertising costs $61,732,970 $43,242,930 $37,208,243
----------- ----------- -----------
$61,732,970 $43,242,930 $37,208,243
=========== =========== ===========
NOTE:
(a) All other items as called for by Rule 12-11 are less than 1% of net
sales for each year.
-18-
EXHIBIT INDEX
Reg. S-K
Item 601 EXHIBIT
3(a)* Restated Articles of Organization as amended. (Exhibit 3
to Form 10-Q filed for the period ended March 31, 1988.)
3(b)* By-Laws as amended. (Exhibit 3(b) to Form 10-K filed for
the period ended December 31, 1989.)
4(a)* Rights Agreement dated as of September 7, 1988, between
Stanhome Inc. and The Connecticut Bank and Trust Company,
N.A. as amended. (Exhibit 4(a) to Form 10-Q filed for
the period ended September 30, 1988 and Exhibit 1 to Form
8-K filed on October 1, 1990.)
10(a) 1984 Stock Option Plan, as amended and restated through
October 20, 1993.
10(b) 1991 Stock Option Plan, as amended and restated through
October 20, 1993.
10(c) Special Interim Chief Executive Officer Stock Option
Plan.
10(d)* Outline of Deferred Compensation Plan for Non-employee
Directors, as amended. (Exhibit 10(e) to Form 10-K filed
for the period ended December 31, 1988.)
10(e)* Employment Contract, as amended, with E. Freedman.
(Exhibit 10(e) and 10(i) to Form 10-K filed for the
periods ended December 31, 1983 and December 31, 1986
respectively, Exhibit 19(a) to Form 10-Q filed for the
period ended June 30, 1989, and Exhibit 19(e) to Form
10-K filed for the period ended December 31, 1992.)
10(f)* Employment Agreement with James P. Smith, Jr. (Exhibit
10 to Form 10-Q filed for the period ended September 30,
1993.)
10(g) Employment Agreement with Alejandro Diaz Vargas effective
as of August 31, 1993.
10(h) Employment Agreement with G. William Seawright made as of
November 9, 1993.
10(i) Management Incentive Plan, as amended and restated
effective January 1, 1994.
10(j) Retirement Agreement with G. William Seawright made as of
November 9, 1993.
10(k)* Form of Supplemental Retirement Plan, as amended.
Similar plans exist with Alejandro Diaz Vargas and Allan
G. Keirstead. (Exhibit 19(b) to Form 10-K filed for the
period ended December 31, 1992.)
10(l) Form of Supplemental Retirement Contract Amendment.
Similar amendments exist with Alejandro Diaz Vargas and
Allan G. Keirstead as of February 4, 1994.
-19-
10(m)* Form of Severance Agreement. Similar agreements exist
with Allan G. Keirstead, Bruce H. Wyatt, Ronald R.
Jalbert, and Thomas E. Evangelista. (Exhibit 19(d) to
Form 10-K for the period ended December 31, 1992.)
10(n) Agreement under Supplemental Pension Plan with Ronald R.
Jalbert made as of March 5, 1986 and amended as of March
28, 1988.
10(o)* Change in Control Agreement made as of January 1, 1992
with certain corporate and subsidiary non-executive
officers. (Exhibit 19(c) to Form 10-K filed for the
period ended December 31, 1991.)
10(p)* Form of Change in Control Agreement. Similar agreements
exist with Alejandro Diaz Vargas, Allan G. Keirstead,
Bruce H. Wyatt, Ronald R. Jalbert, Thomas E. Evangelista,
and John W. Stillwaggon. (Exhibit 19(c) to Form 10-K for
the period ended December 31, 1992.)
10(q) Amendment to Change in Control Agreement with Alejandro
Diaz Vargas effective as of August 31, 1993.
10(r) Change in Control Agreement with G. William Seawright
made as of November 9, 1993.
10(s)* License Agreement between Precious Moments, Inc. and
Enesco Corporation. (Exhibit 10 to Form 10-Q filed for
the period ended June 30, 1993.)
13 Portions of the 1993 Annual Report to the Stockholders of
Stanhome Inc.
21 Subsidiaries of Stanhome Inc.
23 Consent of Arthur Andersen & Co.
24 Power of Attorney
________________________________________
*Incorporated Herein By Reference
-20-
GRAPHICS APPENDIX LIST
EDGAR VERSION TYPESET VERSION
1993 Form 10-K, Exhibit 13-- 1993 Form 10-K, Exhibit 13 --
(Selected Portions of Stanhome's (Selected Portions of Stanhome's
1993 Annual Report to Stockholders) 1993 Annual Report to Stockholders)
Page 1 -- Four bar charts omitted Page 1 -- Four bar charts
depicting Sales, Operating Profit, Earnings Per Share Fully
Diluted Net Income, and Return on Equity, respectively. (The text
and numbers used in these charts appear in the text of the EDGAR
Version.)
-21-