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UNITED STATES
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
For the fiscal year ended December 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 0-1349
ENESCO GROUP, 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 No.)
225 Windsor Drive, Itasca, Illinois 60143
- ------------------------------------------- ---------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (630) 875-5300
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 Pacific 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. [ ]
The aggregate market value of the voting stock held by non-affiliates
of the registrant was $66,801,789 on January 31, 2001.
The number of shares outstanding of the registrant's Common Stock as of
March 16, 2001 was 13,648,408 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 the fiscal
year ended December 31, 2000 (the "2000 Annual Report"). Part III of this Form
10-K incorporates by reference certain information from the registrant's
definitive Proxy Statement, dated March 16, 2001 (the "Proxy Statement"), for
its Annual Meeting of Stockholders to be held on April 26, 2001.
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P A R T I
ITEM 1. BUSINESS.
General
We are a leading designer, importer and international distributor of
creatively designed giftware items, including proprietary and licensed lines of
collectibles and decorative accents. We sell branded gifts, collectibles and
decorative accents at wholesale to independent retailers, mass marketers,
catalogers and other distributors. Our products include diverse lines of branded
porcelain bisque, cold cast and resin figurines, cottages, musicals, music
boxes, ornaments, plush animals, waterballs, tableware and general home
accessories. Our products are primarily produced by independent manufacturers in
the Far East. In many instances, a factory's total capacity is devoted
exclusively to Enesco's product.
Enesco was incorporated in Massachusetts in 1931 as Stanley Home
Products and changed its name to Stanhome Inc. in 1982. As part of a major
corporate and operational restructuring in 1997, we sold our Hamilton Direct
Response Group and Stanhome Direct Selling Group businesses. In 1998, our
stockholders voted to change the company's name from Stanhome Inc. to Enesco
Group, Inc. The company also relocated its principal executive offices from
Westfield, Massachusetts to Itasca, Illinois, where its principal operating
subsidiary, Enesco Corporation, was located.
To complete our transformation into a singularly focused international
designer and marketer of branded gifts, collectibles and decorative home
accents, at the end of 1999 we merged certain of our direct and indirect
subsidiaries, including Enesco Corporation, into Enesco Group, Inc. Our
corporate offices are located at 225 Windsor Drive, Itasca, Illinois 60143-1225.
Our telephone number at that location is (630) 875-5300.
Product
Enesco's giftware, collectible and decorative accent product lines
consist of approximately 10,000 items. These product lines are based in part on
Enesco's collection of proprietary designs and in part on licenses Enesco and
its subsidiaries have obtained from independent creative designers. Among
Enesco's best known licensed lines are:
- - Precious Moments - Cherished Teddies - Kim Anderson's Pretty as a Picture
- - Harry Potter - Looney Tunes - Powerpuff Girls
- - Mary Engelbreit - Country Living - Julie Ueland
- - John Deere - Walt Disney Company - Wizard of Oz
- - Coca-Cola - Mahogany Princess - Funnybone Originals
- - Raggedy Anne & Andy - Calico Kittens - Isabelle de Borchgrave
Enesco's best known proprietary product lines include:
- - Mary's Moo Moos - Growing Up Girls - Friends of the Feather
- - Circle of Love - Lilliput Lane - Border Fine Arts
For its collectible lines, including Precious Moments and Cherished
Teddies, we introduce new items and limited edition pieces each year. To allow
for these new introductions and to keep each line balanced, traditionally we
have retired a number of the existing pieces from production each year.
Retirement of an item usually increases the value of the item on the secondary
market and supports the overall collectibility of the line. We base our decision
to retire a piece on a number of factors, including consumer demand and
marketing and manufacturing considerations.
Enesco offers a wide range of other giftware and home accessory items
to satisfy seasonal and non-seasonal consumer demand and to introduce new
product designs that may develop into collectible product lines in the future.
Mary's Moo Moos figurines, originally introduced in 1994, rapidly became a
popular line and have achieved their own collectible status. Most of our
products have suggested retail prices between $5 and $50.
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Customers
Our core customers are approximately 20,000 independent gift retailers
worldwide. In addition, sales were made to national chains, mail order houses,
television home shopping and department stores, including Carlton Cards stores,
Avon, Fingerhut, Claire's, Barnes & Noble, Walgreens, Wal-Mart, K-Mart and
Target. No single account represented more than 5% of Enesco's sales in 2000.
Sales and Marketing
Throughout 2000, we analyzed our sales structure and how well it
responded to a myriad of changes in the card and gift arena. We realized that to
remain a leader in the industry, we needed to restructure the United States
sales team to better partner with our retailers. This type of organizational
redesign has proven successful in other areas of Enesco's sales division over
the last two years.
On November 1, 2000, we announced a major restructuring of our United
States Retail Specialty Sales Division in an effort to build sales and better
support our card, gift and collectible retailer base. Effective January 1, 2001,
Enesco began utilizing an account management-focused sales team comprised of
approximately 125 field sales employees, eliminating its historical structure of
card and gift channel independent contractor sales representatives based
throughout the United States. The majority of the new field sales organization
is made up of former independent contractors, who received in-depth account
management training as Enesco employees.
Smaller accounts in the United States and those that are geographically
remote, are handled by Enesco's inside sales account managers. They are trained
to sell on the telephone to retailers, including prospecting for new accounts
and contacting customers who have not been contacted by the field sales team in
the past few years. We continue to utilize inside sales employees to manage our
larger, national accounts.
Each of Canada, France and the United Kingdom have their own employee
sales organizations. Enesco also has agreements with foreign affiliates or
distributors in Australia, Canada, Ecuador, France, Germany, Hong Kong,
Indonesia, Japan, Lebanon, Malaysia, The Netherlands, New Zealand, Paraguay,
Peru, Philippines, Singapore, South Korea, Taiwan, Thailand, the United Kingdom
and Vietnam. In addition to selling various product lines itself in the U.K. and
several other European countries, Enesco European Giftware Group Limited, a
subsidiary of Enesco Group, Inc., with its headquarters located in Carlisle,
Cumbria, England, oversees the operations of affiliated companies located in
Germany and France and administers the collectors clubs that are based outside
of North America.
Net international sales in 2000 decreased 12% compared to 1999 and comprised
approximately 24% of the Company's sales in 2000, compared with approximately
23% in 1999 and 19% in 1998. See also Note 7 to Consolidated Financial
Statements appearing on Page 26 of the 2000 Annual Report which is incorporated
herein by reference.
We believe that Enesco's general terms of sale are competitive in the
giftware industry. On August 1, 2000, Enesco introduced a new retailer
initiative in the United States called the Partners in Profit Program, primarily
for the card, gift and collectible channels. The program simplified our type of
account structure and allows all accounts to participate in volume based
discount programs.
We support the marketing efforts of our sales force with an active
promotional program, including displays of our product lines in nine showrooms
located throughout the United States, participation at trade and private shows
held in major U.S. and foreign cities, trade and consumer advertising and annual
catalogs. In addition, we maintain an interactive consumer information Internet
website at www.enesco.com and maintain toll-free telephone lines for customers
and consumers.
Enesco's collectors clubs are an important component of its marketing
program for its collectible product lines. Consumers may subscribe for exclusive
product offerings and newsletters from any of Enesco's clubs. During 2000, the
number of active memberships for the collectors clubs continued a downward
trend.
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Design and Production
Enesco has a continuous program of new product development. New items
are added to the product line only if they can be produced and marketed on a
basis that meets our profitability criteria. We routinely utilize market
research and test marketing to evaluate customer reaction to our new products.
We also obtain information from our retail customers, sales force and product
development staff on trends and consumer reaction. We believe that our ability
to design, produce and market large numbers of new products annually provide a
competitive advantage in the giftware industry, since product sales are in part
dependent on our ability to identify and respond quickly to changing trends and
to utilize our design and production systems to bring new product to market.
The products included in the Lilliput Lane and Border Fine Arts lines
are supplied in part by manufacturing plants owned by Enesco's subsidiaries
operating in England and Scotland, respectively. Substantially all of Enesco's
other product lines are produced by independent manufacturers in the Far East,
under the supervision of personnel from Enesco's affiliate in Hong Kong, Enesco
International (H.K.) Limited, and in the Philippines, Indonesia, Thailand,
Europe and Canada. During 2000, Enesco's purchases from its three largest
contract manufacturers accounted for approximately 34%, 26% and 11%,
respectively, of its total purchases with no other single manufacturer
accounting for more than 10% of Enesco's net purchases. During 2000,
approximately 70% of Enesco's total product purchases came from manufacturing
sources located in the People's Republic of China (P.R.C.), which enjoys
most-favored nation status. While Enesco believes that there are other
manufacturing sources available for its product lines, any loss or substantial
reduction of sourcing capability from one or more of its predominant
manufacturing facilities could have a significant short-term adverse effect on
its importing and distribution operations.
We require all manufacturing sources, whether affiliates or contract
manufacturers, to comply with quality and labor standards established and
enforced by Enesco.
Distribution
In order to serve our customers located in the United States, and to a
certain extent international customers as well, product is shipped by ocean
freight from abroad and then by rail or truck to Enesco's warehouse facilities
and distribution facility, located in Elk Grove Village, Illinois. The main
warehouse facility also serves as Enesco's distribution facility and main
showroom. Shipments from Enesco to its customers are handled by United Parcel
Service and other commercial carriers.
Seasonality and Backlog
In addition to our everyday gift products, we produce specially
designed product for holiday seasons, including Christmas, Valentine's Day,
Easter, Mother's Day, Father's Day, Halloween and Thanksgiving. The pattern of
our sales is influenced by the shipment of seasonal merchandise. During 1999,
our sales peaked in the second and third quarters. However, during 2000 sales
peaked in the third and fourth quarters. This shift reflects the change in
shipping patterns initiated in 2000 and the fourth quarter 2000 sales of Harry
Potter products.
In order to improve customer deliveries, improve customer service and
reduce working capital in the United States, we changed our seasonal shipping
patterns in 2000. New product introductions were grouped by occasion and shipped
to arrive in retail stores based on a predetermined shipping schedule.
Generally, product was purchased later and shipped to customers later allowing
us to reduce inventory and reduce the use of extended terms offered to
customers.
At the end of 2000, Enesco had a backlog of orders totaling
approximately $48 million, as compared to $50 million at the end of 1999. It is
standard practice in the giftware industry, however, that orders are subject to
amendment or cancellation by customers prior to shipment. Due to the many
external factors that can impact the status of unshipped orders at any
particular time, the comparison of backlog orders in any 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
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used by Enesco to provide an incentive for its customers to place orders and
accept shipments at specified times in the year.
Competition
Competition in the giftware, collectibles and decorative accent
industry in the United States, Canada, United Kingdom and Europe is highly
fragmented among a number of companies and product categories. The principal
factors affecting success in the marketplace are originality of product design,
quality, price, marketing ability, customer service and sourcing. Enesco's main
competitors in the United States are Hallmark, Department 56, Lladro, Cast Art,
Midwest Imports, Boyd's Bears, Ty, Inc. and Russ Berrie, among others.
Trademarks and Other Intellectual Property
The intellectual property rights associated with Enesco's licensed
product lines are materially important to our sales, especially the Precious
Moments(R) and Cherished Teddies(R) lines, which accounted for approximately 38%
and 14%, respectively, of Enesco's consolidated revenue from continuing
operations during 2000, compared to 37% and 22%, respectively, for 1999 and 38%
and 20% for 1998. The internal development and licensing of new product is
expected to lessen our dependency on existing trademarks and copyrighted
designs.
We continuously enter into various license agreements relating to
trademarks, copyrights, designs and products which enables us to market new
items compatible with our product lines. Our licenses are either non-exclusive
or exclusive for specific products in specified territories. Royalties are paid
on licensed items and, in many cases, advance royalties and minimum guarantees
are required by these license agreements.
Protection of all of Enesco's intellectual property, whether owned or
licensed, is important to our business. We maintain an aggressive and visible
program to identify and challenge companies and individuals worldwide who
infringe our registered trademarks and copyrighted designs.
Employees and Related Matters
As of December 31, 2000, Enesco employed approximately 800 persons in
the United States. Enesco's U.S.-based warehouse personnel employed as of that
date are represented by Local Union No. 781 of the Teamsters under a contract
that expires on June 30, 2001. Enesco believes that its labor relations are
good. As of the same date, Enesco's foreign subsidiaries employed approximately
870 persons.
Effective January 1, 2001, Enesco began utilizing an account
management-focused sales team comprised of approximately 125 field sales
employees, eliminating its historical structure of card and gift channel
independent contractor sales representatives based throughout the United States.
Enesco continues to utilize inside sales employees to manage national accounts
and smaller accounts on a telemarketing basis.
Financial and Other Information
Information required by this item is set forth in the sections entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" beginning at Page 6 of the Annual Report, and "Notes to Consolidated
Financial Statements" beginning at Page 17 of the Annual Report, and is
incorporated herein by reference.
On March 16, 2001, Enesco agreed to modify its credit agreement with
Fleet National Bank. This included a modification of the financial covenants,
which was agreed to on March 23, 2001. Enesco further agreed to modify the
credit agreement on April 2, 2001 to reduce the commitment to $25 million and
grant Fleet National Bank a security interest in inventory and accounts
receivable. These modifications are not expected to have a material adverse
effect on the liquidity of Enesco or its ability to meet anticipated
requirements for working capital, dividends, capital expenditures or the stock
repurchase program.
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ITEM 2. PROPERTIES.
Enesco owns its principal executive offices in the United States
located at 225 Windsor Drive, Itasca, Illinois and its showroom, distribution
and warehouse facilities in Elk Grove Village, Illinois. We also lease showrooms
in eight other major market locations in the U.S. for the display of our
products and a warehouse in West Chicago, Illinois.
Most of the principal physical properties relating to the foreign
subsidiaries of the Enesco Giftware Group are leased. These include Enesco
European Giftware Group Limited, which leases manufacturing plants and warehouse
facilities in Penrith, Workington, and Carlisle, Cumbria, England, and Langholm,
Dumfriesshire, Scotland. These manufacturing facilities are generally operating
at or near capacity. N.C. Cameron leases its office building in Mississauga,
Ontario, Canada.
ITEM 3. LEGAL PROCEEDINGS.
In the ordinary course of Enesco's business, there have arisen various
legal proceedings pending against Enesco and its subsidiaries. While we cannot
predict the eventual outcome of these proceedings, we believe that none of these
proceedings will have a material adverse impact upon the consolidated financial
statements of Enesco.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following persons are Executive officers of Enesco as of March 16, 2001:
Date First
Name Age Positions Elected
- ---- --- --------- -------
Anne-Lee Verville 55 Chairman of the Board 1/17/01
Interim Chief Executive Officer
and President 1/17/01
Member of the Governance Committee 4/24/97
Member of the Executive
Committee 4/27/95
Member of the Compensation and
Stock Option Committee 4/23/92
Member of the Audit Committee 6/06/91
Director 6/05/91
Prior to Ms. Verville's elections as Director, Chairman of the Board
and Interim Chief Executive Officer of Enesco, she served as General Manager -
Worldwide Education Industry for IBM Corp. in White Plains, NY from 1967 to
1997.
Eugene Freedman 76 Director 9/04/97
Founding Chairman 9/02/98
Member of the Executive
Committee 9/04/97
Mr. Freedman previously served as Vice Chairman of Enesco from October,
1997 to September, 1998, Executive Vice President of Enesco from April, 1988 to
September, 1998, and Vice President of Enesco from January, 1984 to April, 1998.
He also served for many years as Chairman, President and Chief Executive Officer
of Enesco Corporation, a subsidiary of Enesco Group, Inc., of which Mr. Freedman
was a founder in 1959.
Jeffrey W. Lemajeur 39 Chief Financial Officer 2/01/01
Treasurer 3/03/99
Prior to Mr. Lemajeur's joining Enesco in January, 1999, he was the
Vice President of Finance, Chief Financial Officer and Treasurer of Binks Sames
Corporation, a manufacturer of spray equipment located in Franklin Park,
Illinois, from 1991 to 1998.
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Josette V. Goldberg 43 Senior Vice President, Human Resources
and Administration 1/17/01
Senior Vice President, Human Resources 1/19/00
Vice President, Human Resources 6/02/99
Prior to Ms. Goldberg's joining Enesco in February 1998, she was the
Vice President of Human Resources for Household Finance Corporation, a consumer
finance division of Household International from 1996 to 1998. Previously, she
spent 11 years with Balcor Company, a real estate and property management
division of American Express where she held the position of Senior Vice
President of Human Resources and Administration.
M. Frances Durden 44 Clerk 3/01/01
Vice President,
General Counsel and
Secretary
Ms. Durden previously served as Corporate Counsel of Enesco from
January, 1999 until February, 2001. Prior to Ms. Durden joining Enesco in
January 1999, she served as Senior Vice President and General Counsel of Michael
Anthony Jewelers, Inc. in Mt. Vernon, New York, from 1994 to January, 1999.
Prior to that, she practiced corporate law with an Ohio law firm.
Charles E. Sanders 52 Assistant Treasurer 2/28/01
Prior to Mr. Sanders joining Enesco in December, 2000, he served in
various positions from 1971 to 2000, including Treasurer and Corporate Secretary
with RDM Sports Group, Inc. in Atlanta, GA.
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 Section entitled
"Stock Market, Dividend and Shareholder Information" appearing on page 32 of the
2000 Annual Report 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 Five Years" appearing on page 34 of the 2000 Annual
Report 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 6 through 11 of the 2000 Annual Report and is
incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Information required by this item is set forth in the Section entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Market Risk" appearing on page 11 of the 2000 Annual Report and is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Information required by this item is set forth in the Financial
Statements, together with the accompanying Notes and Report of Independent
Public Accountants,
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appearing on pages 12 through 31 of the 2000 Annual Report and is incorporated
herein by reference. Also incorporated herein by reference are the Quarterly
Results (Unaudited) during 2000 and 1999 set forth on page 33 of the 2000 Annual
Report.
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 "Proposal 1: Election of Directors" and
"Information as to Board of Directors and Nominees" in the Company's Proxy
Statement 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) of Form 10-K and Instruction 3 to Item
401(b) of Regulation S-K. Information required by this item regarding reporting
compliance is included under the caption "Section 16(a) Beneficial Ownership
Reporting Compliance" in the Company's Proxy Statement and is incorporated
herein by reference.
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", "Performance Graphs", "Compensation of Non- Employee
Directors" and "Compensation Committee Interlocks and Insider Participation" in
the Company's Proxy Statement and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Security Ownership of Certain Beneficial Owners
Information required by this item is set forth under the caption "Our
Largest Stockholders" and "Shares Held By Our Directors and Executive Officers"
in the Company's Proxy Statement and is incorporated herein by reference.
Security Ownership of Management
Information required by this item is set forth under the caption
"Shares Held by Our Directors and Executive Officers" in the Company's Proxy
Statement and is incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information required by this item is set forth under the caption
"Compensation Committee Interlocks and Insider Participation" in the Company's
Proxy Statement 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 Enesco Group, Inc. on page 11 of this Form
10-K.
(a)(3) Exhibits. The exhibits required by this item are listed in the
Exhibit Index on pages 14 - 16 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(w) in the Exhibit Index.
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(b) Reports on Form 8-K. No reports on Form 8-K were filed by the
Company during the fourth quarter of 2000.
FORWARD LOOKING STATEMENTS
This Form 10-K including all information incorporated by reference into
this Form 10-K, contains certain forward-looking statements within the meaning
of the Federal securities laws. These forward-looking statements may include the
words "believe," "expect," "plans" or similar words and are based in part on
Enesco's reasonable expectations and are subject to a number of factors and
risks, many of which are beyond Enesco's control. Enesco's future results may
differ materially from its current results and actual results could differ
materially from those projected in the forward-looking statements contained in,
and incorporated by reference into, this Form 10-K as a result of certain
factors including, but not limited to, those set forth below. Readers should
also carefully review any risk factors described in other documents that we file
from time to time with the Securities and Exchange Commission:
- Our ability to manufacture, increase capacity, source and ship new and
continuing product in a timely manner and consumers' acceptance of
those products at prices that will be sufficient to profitably recover
development, manufacturing, marketing, royalty and other costs of the
products;
- economic conditions including retail sales, higher fuel prices,
currency fluctuations and government regulation and other actions in
the various markets in which we operate throughout the world;
- the inventory policies of retailers, together with the increased
reliance by retailers on quick response inventory management
techniques, which increase the risk of underproduction of popular
items, overproduction of less popular items and failure to achieve
tight and compressed shipping schedules;
- the impact of competition on revenues, margins and other aspects of
Enesco's business, including the ability to secure, maintain and renew
popular licenses and the ability to attract and retain talented
employees in a competitive environment.
In light of these uncertainties and risks, there can be no assurance
that the forward-looking statements in this Form 10-K will occur or continue in
the future. Except for required, periodic filings under the Securities Exchange
Act of 1934, Enesco undertakes no obligations to release publicly any revisions
to these forward looking statements that may reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events.
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 23rd day of
March, 2001.
ENESCO GROUP, INC.
(Registrant)
By: /s/ Anne-Lee Verville
---------------------------------------------
Anne-Lee Verville
Interim President and Chief
Executive Officer
By: /s/ Jeffrey W. Lemajeur
-------------------------
Jeffrey W. Lemajeur
Chief Financial Officer
and Treasurer
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Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below on the 23rd day of March, 2001 by the
following persons on behalf of the registrant and in the capacities indicated.
Signature Title
/s/ Homer G. Perkins * Director
- ----------------------------
Homer G. Perkins
/s/ John F. Cauley * Director
- ----------------------------
John F. Cauley
/s/ Anne-Lee Verville Chairman of the Board,
- ---------------------------- Director and Interim Chief
Anne-Lee Verville Executive Officer and President
/s/ Judith R. Haberkorn * Director
- ----------------------------
Judith R. Haberkorn
/s/ Donna Brooks Lucas * Director
- ----------------------------
Donna Brooks Lucas
/s/ Eugene Freedman * Founding Chairman and
- ---------------------------- Director
Eugene Freedman
/s/ George R. Ditomassi * Director
- ----------------------------
George R. Ditomassi
/s/ Thane A. Pressman * Director
- ----------------------------
Thane A. Pressman
*By: /s/ Anne-Lee Verville
------------------------
Anne-Lee Verville
Attorney-In-Fact
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ENESCO GROUP, INC.
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS - Incorporated by reference to "Report
of Independent Public Accountants" on page 31 of the Enesco Group, Inc.
2000 Annual Report to Stockholders.
FINANCIAL STATEMENTS - All of which are incorporated by reference to the Enesco
Group, Inc. 2000 Annual Report to Stockholders.
Consolidated Balance Sheets as of December 31, 2000 and 1999
Consolidated Statements of Income For the Years Ended December 31, 2000,
1999 and 1998
Consolidated Statements of Retained Earnings For the Years Ended December
31, 2000, 1999 and 1998
Consolidated Statements of Comprehensive Income For the Years Ended
December 31, 2000, 1999 and 1998
Consolidated Statements of Cash Flows For the Years Ended December 31,
2000, 1999 and 1998
Notes to Consolidated Financial Statements as of December 31, 2000, 1999
and 1998
Quarterly Results (Unaudited)
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON PAGE 12
SCHEDULE SUPPORTING FINANCIAL STATEMENTS:
Schedule
Number Description
------ -----------
II Valuation and Qualifying Accounts and Reserves For
Each of the Three Years Ended December 31, 2000(a)
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.
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12
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Enesco Group, Inc.:
We have audited in accordance with auditing standards generally accepted in the
United States, the consolidated financial statements included in Enesco Group,
Inc.'s annual report to shareholders incorporated by reference in this Form
10-K, and have issued our report thereon dated February 21, 2001. Our audit was
made for the purpose of forming an opinion of the consolidated financial
statements taken as a whole. The schedule listed in the accompanying index is
the responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic consolidated financial statements. This schedule has been subjected to
the auditing procedures applied in the audit of the consolidated financial
statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation to the consolidated
financial statements taken as a whole.
/s/ Arthur Andersen LLP
Chicago, Illinois
February 21, 2001
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13
ENESCO GROUP, INC. SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR EACH OF THE THREE YEARS ENDED DECEMBER 31, 2000
Column A Column B Column C Column D Column E
Additions
Balance at Charged to Charged to Balance at
Beginning of Costs and Other End of
Description Period Expenses Accounts Deductions Period
----------- ------ -------- -------- ---------- ------
FOR THE YEAR ENDED DECEMBER 31, 1998 (a)
Reserves which are deducted in the
balance sheet from assets to which they apply-
Reserves for uncollectible accounts $ 8,270,696 $ 3,017,927 $-- $ 4,077,335 $ 7,211,288
Reserves for returns and allowances (b) $ 2,875,651 $12,217,896 $-- $13,004,365 $ 2,089,182
Accumulated amortization of other assets $26,845,065 $ 3,194,815 $-- $ 407,843 $29,632,037
Reserve for downsizing corporate headquarters $12,813,000 $ -- $-- $ 2,261,000 $10,552,000
Reserve for discontinued operations $ 9,065,000 $ -- $-- $ 6,233,000 $ 2,832,000
FOR THE YEAR ENDED DECEMBER 31, 1999
Reserves which are deducted in the balance
sheet from assets to which they apply-
Reserves for uncollectible accounts $ 7,211,288 $ 3,318,106 $-- $ 3,268,744 $ 7,260,650
Reserves for returns and allowances $ 2,089,182 $13,038,165 $-- $11,972,237 $ 3,155,110
Accumulated amortization of other assets $29,632,037 $ 2,224,491 $-- $ 15,025 $31,841,503
Reserve for downsizing corporate headquarters $10,552,000 $ -- $-- $ 4,087,020 $ 6,464,980
Reserve for discontinued operations $ 2,832,000 $ -- $-- $ 512,664 $ 2,319,336
FOR THE YEAR ENDED DECEMBER 31, 2000
Reserves which are deducted in the balance
sheet from assets to which they apply-
Reserves for uncollectible accounts $ 7,260,650 $ 1,311,859 $-- $ 4,355,146 $ 4,217,363
Reserves for returns and allowances $ 3,155,110 $ 9,988,091 $-- $10,068,640 $ 3,074,561
Accumulated amortization of other assets $31,841,503 $ 2,658,267 $-- $ 55,058 $34,444,712
Reserve for downsizing corporate headquarters $ 6,464,980 $ -- $-- $ 3,086,284 $ 3,378,696
Reserve for discontinued operations $ 2,319,336 $ -- $-- $ 1,994,735 $ 324,601
NOTE:
(a) In 1998, the goodwill asset was written down by $46 million to fair
value-this direct writedown of the asset is not reflected in this schedule.
(b) 1998 amounts restated to reflect all categories of sales returns, allowances
and credits
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14
EXHIBIT INDEX
Reg. S-K
Item 601 EXHIBIT
- -------- -------
2 (a)* Agreement of Purchase and Sale dated April 22, 1997
by and among The Crestley Collection, Ltd., The
Bradford Exchange, Ltd. (with respect to Section
12(p) therein only) and Stanhome Inc. (Exhibit 2.1 to
Form 8-K filed on June 5, 1997 in Commission File No.
0-1349.)
2 (b)* Stock and Asset Purchase Agreement dated as of
November 24, 1997 by and between Stanhome Inc. and
Laboratoires De Biologie Vegetale Yves Rocher.
(Exhibit 2.1 to Form 8-K filed on December 31, 1997
in Commission File No. 0-1349.)
3 (a)* Restated Articles of Organization as amended.
(Exhibit 3(a) to Form 10-Q filed for the period ended
March 31, 1998 in Commission File No. 0-1349.)
3 (b)* By-Laws as amended. (Exhibit 3 (b) to Form 10-Q filed
for the period ended March 31, 1998 in Commission
File No. 0-1349.)
4 (a)* Renewed Rights Agreement dated as of July 22, 1998
between Enesco Group, Inc. and Mellon Investor
Services L.L.C. (Exhibit 4 to Form 8-K filed on July
23, 1998 in Commission File No. 0-1349.)
4 (b)* Warrant Agreement dated June 29, 2000 by and between
Enesco Group, Inc. and Warner Bros. (Exhibit 4 to
Form 10-Q filed for the period ended June 30, 2000 in
Commission File No. 0-1349).
10 (a)* 1984 Stock Option Plan, as amended and restated
through December 4, 1996. (Exhibit 10 (a) to Form
10-K filed for the period ended December 31, 1996 in
Commission File No. 0-1349.)
10 (b)* 1991 Stock Option Plan, as amended and restated
through December 4, 1996. (Exhibit 10 (b) to Form
10-K filed for the period ended December 31, 1996 in
Commission File No. 0-1349.)
10 (c)* Special Interim Chief Executive Officer Stock Option
Plan. (Exhibit 10(c) to Form 10-K filed for the
period ended December 31, 1993 in Commission File No.
0-1349.)
10 (d)* 1996 Stock Option Plan, as amended and restated
through January 20, 1999. (Exhibit 10(d) to Form 10-K
filed for the period ended December 31, 1998 in
Commission File No. 0-1349.)
10 (e)* 1998 Chairman Stock Option Plan. (Exhibit 10(f) to
Form 10-K filed for the period ended December 31,
1998 in Commission File No. 0-1349.)
10 (f)* Non-Employee Director Stock Plan. (Exhibit 10 to Form
10-Q filed for the period ended March 31, 1995 in
Commission File No. 0-1349.)
10 (g)* Enesco Group, Inc. 1999 Non-Employee Director Stock
Plan. (Exhibit 10(h) to form 10-K filed for the
period ended December 31, 1998 in Commission File No.
0-1349.)
10 (h)* Management Incentive Plan, as amended and restated
effective January 1, 1999. (Exhibit 10(j) to Form
10-K filed for the period ended December 31, 1998 in
Commission File No. 0-1349.)
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15
10 (i)* Notice of Intent to Terminate dated July 12, 2000 of
Allan G. Keirstead under Relocation Agreement.
(Exhibit 10 to Form 10-Q filed for the period ended
June 30, 2000 in Commission File No. 0-1349.)
10 (j) Allan G. Keirstead Release Agreement.
10 (k)* Jeffrey A. Hutsell Release Agreement. (Exhibit 10.2
to Form 10-Q filed for the period ended September 30,
2000 in Commission File No. 0-1349.)
10 (l)* Peter R. Johnson Severance Agreement. (Exhibit 10 to
Form 10-Q filed for the period ended September 30,
1999 in Commission File No. 0-1349.)
10 (m)* Form of Change in Control Agreement. (Exhibit 19(c)
to Form 10-K filed for the period ended December 31,
1992 in Commission File No. 0-1349.) A substantially
identical agreement exists with Eugene Freedman.
10 (n)* Form of Change in Control Agreement with certain
executive officers and non-executive officers
(Exhibit 19(c) to Form 10-K filed for the period
ended December 31, 1991 in Commission File No.
0-1349.) Substantially identical agreements exist
with Josette V. Goldberg and Jeffrey W. Lemajeur.
10 (o)* Enesco Group, Inc. Supplemental Retirement Plan, as
amended and restated, effective January 1, 1999.
(Exhibit 10(y) to Form 10-K filed for the period
December 31, 1998 in Commission File No. 0-1349.)
10 (p)* Thomas E. Evangelista Release Agreement. (Exhibit
10(cc) to Form 10-K filed for the period ended
December 31, 1998 in Commission File No. 0-1349.)
10 (q)* License Agreement between Precious Moments, Inc. and
Enesco Corporation. (Exhibit 10 to Form 10-Q filed
for the period ended June 30, 1993 in Commission File
No. 0-1349.)
10 (r)* First Amendment to License Agreement between Precious
Moments, Inc. and Enesco Corporation. (Exhibit 10(hh)
to Form 10-K filed for the period ended December 31,
1997 in Commission File No. 0-1349.)
10 (s)* Second Amendment to License Agreement between
Precious Moments, Inc. and Enesco Corporation.
(Exhibit 10(bb) to Form 10-K filed for the period
ended December 31, 1998 in Commission File No.
0-1349.)
10 (t)* Amended and Restated Senior Revolving Credit
Agreement dated August 23, 2000 by and between Enesco
Group, Inc. and Fleet National Bank. (Exhibit 10.1 to
Form 10-Q filed for the period ended September 30,
2000 in Commission File No. 0-1349.)
10 (u) First Amendment to Amended and Restated Senior
Revolving Credit Agreement
10 (v) Second Amendment to Amended and Restated Senior
Revolving Credit Agreement.
10 (w) Third Amendment to Amended and Restated Senior
Revolving Credit Agreement.
13 Portions of the 2000 Annual Report to the
Stockholders of Enesco Group, Inc.
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16
21 Subsidiaries of Enesco Group, Inc.
23 Consent of Arthur Andersen LLP
24 Power of Attorney
*Incorporated By Reference
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