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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[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 1-8681
RUSS BERRIE AND COMPANY, INC.
(Exact name of registrant as specified in its charter)
New Jersey 22-1815337
- ---------------------------------- ----------------------------
(State of or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
111 Bauer Drive, Oakland, New Jersey 07436
- ----------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (201) 337-9000
Securities registered pursuant to Section 12 (b) of the Act:
Name of each exchange
Title of each Class on which registered
------------------- -------------------
Common Stock, $0.10 stated value New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No _____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
Approximate aggregate market value of the voting stock held by
non-affiliates of the Registrant as of March 18, 1994 was $134,686,174.
The number of shares outstanding of each of the Registrant's classes of common
stock, as of March 18, 1994, was as follows:
Class Number of Shares
------------------- ----------------
Common Stock, $0.10 stated value 21,438,389
Documents Incorporated by Reference
Certain portions of the Registrant's Proxy Statement dated March 15, 1994
relating to registrant's Annual Meeting of Shareholders to be held on April 25,
1994 (the "1994 Proxy Statement"), are incorporated by reference into Part III
of this report.
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PART I
ITEM 1. BUSINESS
Russ Berrie and Company, Inc. was incorporated in New Jersey in 1966. Its
principal executive offices are located at 111 Bauer Drive, Oakland, New Jersey
07436; its telephone number is (201) 337-9000. The term "Company" refers to
Russ Berrie and Company, Inc. and its consolidated subsidiaries, unless the
context requires otherwise.
The Company designs, manufactures through third parties and markets to
retail stores throughout the United States and most countries throughout the
world, a wide variety of impulse gift and toy items. The impulse gift products
are designed to appeal to the emotions of consumers, who purchase the products
impulsively to reflect their feelings of friendship, fun, love and affection.
The suggested retail prices of the Company's products range from $.30 to over
$300. Approximately 83% of the Company's dollar sales are accounted for by
products with a suggested retail price of $14 or less which, coupled with the
products' appeal to consumers' emotions, encourages spontaneous purchases by
consumers.
The Company's extensive line of over 10,000 products encompasses both
seasonal and everyday gift items, including stuffed animals, Trolls, picture
frames, ceramic mugs, porcelain gifts, collectible figurines, gift bags,
greeting cards, keyrings, kitchen magnets, stationery products, toys, and
National Football League and Major League Baseball merchandise.
The products are produced by independent manufacturers, generally in the
Far East, under close supervision by Company personnel and are marketed
primarily by the Company's own direct sales force of approximately 700
full-time employees. In some foreign countries, the Company utilizes
distributors and the Company's toy product line is marketed through independent
representative organizations. The Company believes that its present position
as one of the leaders in the impulse gift industry is due primarily to its
imaginative product design, broad and effective marketing of its products,
efficient distribution, high product quality and commitment to customer
service.
PRODUCTS
The Company markets its impulse gift product line under the trade name
"RUSS" through two divisions: "Plush N' Stuff" and "Gift/Expression". The
Company also markets some of its products through its wholly-owned subsidiary
Papel/Freelance, Inc. The Company markets its product line of toys through Cap
Toys, Inc., a business acquired in October, 1993. Also, the Company's Bright
of America, Inc. subsidiary markets gift products to schools and other
organizations for fundraising purposes and directly to mass market customers.
In addition, the Company operates a chain of retail stores, Fluf N' Stuf, Inc.,
which sells the Company's products and products of unaffiliated companies.
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Plush N' Stuff products include stuffed animals, soft body Trolls, soft
message products, puppets and soft holiday items, generally having suggested
retail prices between $1 and $30. Gift/Expression products include hard body
Trolls, gift bags, ceramic figurines, ceramic mugs, magnets, hair ornaments,
childrens' jewelry and picture frames. Most Gift/Expression products have
suggested retail prices between $1 and $30. For example, the suggested retail
prices for mugs generally range from $5 to $8 and for greeting cards are
generally less than $1.75. Papel/Freelance, Inc.'s products include ceramic
mugs, related ceramic giftware, back to school items and fashion accessories.
Cap Toys, Inc.'s products generally have suggested retail prices between $3 and
$25. The percentages of dollar sales accounted for by the various divisions
during the periods indicated are as follows:
Plush N' Gift/ Papel/
Stuff Expression Freelance Other*
-------- ---------- --------- -----
% % % %
--- --- --- ---
Year ended December 31, 1991 31 47 12 10
Year ended December 31, 1992 28 54 8 10
Year ended December 31, 1993 28 43 13 16
- ----------------------------
* Includes primarily sales by Effanbee Doll Company, the assets of which
were sold in January, 1992, Fluf N' Stuf, Inc., Bright of America, Inc. and Cap
Toys, Inc. (since its acquisition in October 1993).
In addition to its everyday product lines, the Company produces specially
designed products for individual seasons during the year, including Christmas,
Valentine's Day, St. Patrick's Day, Easter, Mother's Day, Graduation, Father's
Day, Halloween and Thanksgiving. During 1993, items specially designed for
individual seasons accounted for approximately 46% of the Company's dollar
sales; no individual season accounted for more than 12% of the Company's dollar
sales. See "Business-Seasonality".
The Company has experienced success with its product line of Trolls which
are marketed through both the Plush N' Stuff and Gift/Expression divisions.
Net sales of the various products associated with Trolls accounted for
approximately 31% during 1993 and 56% during 1992 of consolidated net sales.
However, in the second quarter of 1993 the Company experienced a decline in the
net sales of its Troll product line.
The Company's product line currently consists of more than 10,000 items
(including distinctive variations on basic product designs). Other than the
products associated with Trolls, no single basic product design accounted for
more than 1.8% of dollar sales during 1993.
The Company has entered into a number of license agreements under which it
markets certain items, including products marketed under the National Football
League and Major League Baseball trademarks. Licensed products represented
approximately 10% of the Company's dollar sales in 1993 and 5% in 1992. During
1993, no single license accounted for more than 1.8 % of dollar sales.
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DESIGN AND PRODUCTION
The Company has a continuing program of new product development. The
Company designs its own products and then generally evaluates consumer response
through test marketing in selected unaffiliated retail stores and those
operated by Fluf N' Stuf, Inc. Items are added to the product line only if
they can be obtained and marketed on a basis that meets the Company's
profitability standards. Substantially all of the Company's products are
produced by independent manufacturers on a purchase order basis.
The Company believes that the breadth of its product line and the
continuous development of new products are key elements of its success and that
it is capable of designing and producing large numbers of new products quickly.
The Company has approximately 200 employees responsible for product
development and design in the United States and in the Far East. Generally, a
new design is brought to market in less than nine months after a decision is
made to produce a new product.
Sales of the Company's impulse gift products are, in large part, dependent
on the Company's ability to identify and react quickly to changing consumer
preferences and to utilize its sales and distribution systems to bring new
products to market. Generally, marketing direction and concept planning are
determined by the marketing committee, which is composed of key executives and
marketing and market research personnel. The design committee, consisting of
certain members of the product development department, is responsible for the
development of new products which are compatible with the marketing and product
concepts approved by the marketing committee. The design committee meets
frequently to discuss the development of new products and the adaptation,
refinement or supplementing of existing products to reflect new trends and
preferences. Members of the committees are also in frequent contact with the
Company's customers and sales personnel to obtain their ideas relating to
expansion of the Company's product line. The design committee seeks new
products which, though not necessarily similar to the products now marketed by
the Company, can be marketed through its existing marketing and distribution
systems to current and potential customers. Members of the design and
marketing committees regularly attend trade shows to maintain contact with
customers and to observe market trends.
The Company engages in market research and test marketing to evaluate
consumer reactions to its products. Research into consumer buying trends often
suggest new products. The Company assembles information from retail stores,
including those operated by Fluf N' Stuf, Inc., the Company's sales force and
the Company's own market research department. The Company continually
analyzes its products to determine whether they should be adapted into new or
different products using elements of the initial design or whether they should
be removed from the product line.
5
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Substantially all of the Company's products are produced by independent
manufacturers. During 1993, products accounting for approximately 94% of its
dollar purchases were produced in the Far East and 6% in the United States.
The Company utilizes approximately 225 manufacturers in the Far East, primarily
in the People's Republic of China, Hong Kong, Taiwan, Korea, Thailand and
Indonesia. During 1993, approximately 57% of the Company's dollar amount of
purchases were attributable to manufacturing in the People's Republic of China.
Legislation has been proposed from time to time that would revoke the
most-favored nation status (which is a designation determined annually by the
President of the United States, subject to possible override by Congress) of
the People's Republic of China. Such a revocation would cause import duties to
increase or become applicable to products imported by the Company from the
People's Republic of China. A majority of the Company's staff of approximately
280 employees in Hong Kong, Taiwan, Korea, Thailand and Indonesia monitors the
production process with responsibility for ensuring the quality, safety and
prompt delivery of Company products. Members of the Company's Far East staff
make frequent visits to the manufacturers for which they are responsible. Most
of the Company's manufacturers are small operations, some selling exclusively
to the Company. The Company believes that there are many alternate
manufacturers for the Company's products and the loss of any manufacturer will
not significantly adversely affect the operations of the Company. In 1993, the
supplier accounting for the greatest dollar volume of the Company's purchases
accounted for approximately 12% of such purchases and the five largest
suppliers accounted for approximately 36% in the aggregate.
MARKETING
The Company sells its impulse gift products primarily through its own
direct sales force. Products are sold directly to retail stores in the United
States and in foreign countries, including gift stores, pharmacies, card shops,
book stores, stationery stores, hospitals, college and airport gift shops,
resort and hotel shops, florists, chain stores and military post exchanges.
During 1993, the Company sold products to approximately 85,000 customers. No
single customer accounted for more than 1.3% of dollar sales.
The Company believes that the use of its direct sales force has been a
significant factor in its success. Although sales managers have primary
responsibility for the management of salespeople that report to them, they also
have the responsibility for sales of the Company's products directly to certain
accounts generally located in a defined geographic area. The Company's sales
personnel visit each of their customers every six to eight weeks.
The Company motivates its salespeople through its compensation package,
which consists of salary, commissions and bonuses based on sales. All sales
managers are compensated for their own sales and the sales generated by the
salespeople that report to them. The Company also establishes performance
levels for individual sales personnel. The Company maintains a training
program for its salesforce and offers sales personnel the opportunity for
advancement to sales management positions. Each of the Company's current sales
managers started as a salesperson in the Company.
6
(6)
The Company's salespeople sell impulse gift products from either the Plush
'N Stuff division, the Gift/Expression division or from Papel/Freelance, Inc.
further enabling the Company to successfully market the full range of its
impulse gift products. The Company reinforces the marketing efforts of its
salesforce through an active promotional program, including showrooms,
participation in trade shows, trade advertising and seasonal catalogs. In
addition, beginning in 1992 the Company engaged in advertising through consumer
publications and national television. These advertising programs are designed
to increase consumer awareness of, and esteem toward, RUSS products.
The Company maintains a sales and distribution network to serve customers
in Great Britain, Holland, Belgium, Ireland and Canada. The remainder of the
Company's foreign sales, primarily in Germany, Latin America, Spain, Japan,
Italy, Philippines, and France, are made to distributors for resale to their
customers. Foreign sales, including export sales from the United States,
aggregated $68,295,000, $101,471,000 and $57,867,000 in the years ended
December 31, 1993, 1992 and 1991, respectively. For more information regarding
operations by geographic area, see Note 12 of the Notes to the Consolidated
Financial Statements.
The Company believes that effective packaging and merchandising of its
products are very important to its marketing success. Many products are
shipped in colorful corrugated cartons which can be used as free-standing
displays and can be discarded when all the products have been sold. The
Company also prepares semi-permanent free-standing lucite, metal and wood
products, thereby providing an efficient promotional vehicle for selling the
Company's products. The displays are designed to stimulate consumers' impulse
purchase decisions.
The Company believes that customer service is an important component of
its marketing strategy and therefore has established a Customer Service
Department at each distribution facility that responds to customer requests,
investigates and resolves problems and generally assists customers.
The Company's general terms of sale are believed to be competitive in the
impulse gift industry. The Company provides limited extended payment terms to
customers on sales of seasonal merchandise, e.g., Christmas, Halloween and
Easter and other seasons. The Company has a general policy of not accepting
returns or selling on consignment.
The Company's Cap Toys, Inc. subsidiary develops products in conjunction
with independent toy product inventors. The products selected are produced by
independent manufacturers and are sold primarily to mass merchandisers.
Certain products are supported by an advertising program consisting primarily
of television advertising.
7
(7)
DISTRIBUTION
The Company has customers located throughout the United States and in
order to serve them quickly and effectively, the Company has a distribution
center in South Brunswick, New Jersey, which receives products from suppliers
and then distributes them directly to the Company's customers as well as
supplying the distribution center in Columbus, Ohio.
The distribution center in Petaluma, California receives products directly
from suppliers and serves the Company's customers in the western part of the
United States. The Company generally uses common carriers to distribute to its
customers.
The Company maintains two distribution centers in Southampton, England to
serve its customers in Europe and two facilities in the Toronto, Canada area
for its Canadian customers. The Company's Cap Toy product line is distributed
from a facility in Bedford Heights, Ohio.
SEASONALITY
The pattern of the Company's sales is influenced by the shipment of
seasonal merchandise. The Company generally ships the majority of orders each
year for Christmas in the quarter ended September 30, for Valentine's Day in
the quarter ended December 31 and for Easter in the quarter ended March 31.
The following table sets forth the Company's quarterly sales during 1993, 1992
and 1991.
QUARTERLY SALES
(in millions)
1993 1992 1991
------------ ------------ ------------
Quarter Ended Sales % Sales % Sales %
- ------------- ----- ----- ----- ----- ----- -----
March 31................ $96.3 34.5 $ 96.4 21.7 $62.5 23.3
June 30................. 49.9 17.9 86.3 19.4 50.3 18.8
September 30............ 70.7 25.3 152.1 34.2 82.5 30.8
December 31............. 62.2 22.3 109.6 24.7 72.6 27.1
The Company has historically had higher profit margins in the quarter
ended September 30 as a result of the economies of scale which accompany the
higher sales volume. Commencing late in the second quarter of 1991, net sales
of the Company were favorably impacted by the success of products associated
with the Troll product line which continued into the first quarter of 1993.
However, the Company has experienced a decline in the net sales of its Troll
products beginning in the second quarter of 1993.
8
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BACKLOG
It is characteristic of the Company's business and of the industry in
general that orders for seasonal merchandise are taken in advance of shipment.
The Company's backlog at December 31, 1993 was $32,546,000 and at December 31,
1992 was $37,197,000. The Company ships substantially all of its backlog
within 50 days.
COMPETITION
The impulse gift industry is highly competitive and fragmented. The
Company believes that the principal competitive factors are marketing ability,
reliable delivery, product design, quality, customer service and price.
The Company's principal competitors in the Plush N' Stuff line are Gund,
Inc., Ganz Bros., Ty, Inc., Applause, Inc. and Dakin. Competitors for the
Company's other divisions include American Greetings, Hallmark, Recycled Paper
Products, Enesco and numerous small suppliers and toy competitors. Certain of
the Company's existing or potential competitors may have financial resources
that are substantially greater than those of the Company.
COPYRIGHTS, TRADEMARKS, PATENTS AND LICENSES
The Company prints notices of claim of copyright on substantially all of
its products and has registered hundreds of its designs with the United States
Copyright Office. It also has registered, in the United States and certain
foreign countries, the trademark "RUSS" with a distinctive design, which it
utilizes on most of its products. The Company believes its copyrights,
trademarks and patents are valid, and has pursued a policy of aggressively
protecting them from infringement. However, it does not consider its business
materially dependent on copyright, trademark or patent protection.
The Company also enters into various license agreements to market products
compatible with its product line. Examples of licensed products include
designs of National Football League and Major League Baseball.
EMPLOYEES
As of January 31, 1994, The Company employed approximately 1,900 persons
on a full-time basis. The Company considers its employee relations to be good;
substantially all of the Company's employees are not covered by a collective
bargaining agreement. The Company's policy is to require that its management,
sales and product development and design personnel enter into contracts in
which they agree not to disclose confidential information concerning the
Company and, in the case of management and sales personnel, not to compete with
the Company (subject to certain territorial limitations in the case of
salespersons) for a period of six months after termination of their employment.
9
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GOVERNMENT REGULATION
Certain of the Company's products are subject to the provisions of, among
other laws, the Federal Hazardous Substances Act and the Federal Consumer
Product Safety Act. Those laws empower the Consumer Product Safety Commission
to protect children from certain hazardous articles by excluding them from the
market and requiring a manufacturer to repurchase articles which become banned.
The Commission's determination is subject to judicial review. Similar laws
exist in some states and cities in the United States and in Canada and Europe.
The Company maintains a quality control program to ensure compliance with
applicable laws.
ITEM 2. PROPERTIES
The Company's principal facilities consist of its corporate offices in
Oakland, New Jersey, and the distribution centers in South Brunswick, New
Jersey; Petaluma, California; and Reynoldsburg, Ohio. Additionally, office and
distribution facilities are located in Southampton, England and in the Toronto,
Canada area. The Company owns the facility used by Bright of America, Inc. in
Summersville, West Virginia, one of its facilities in Southampton, England and
most of the office space it uses in Hong Kong. The Company leases its other
facilities. The facilities of the Company are maintained in good operating
condition, are generally adequate for the Company's purposes and, except for
the Dayton, New Jersey; Lakeland, Florida; and Marietta, Georgia facilities,
which were closed as part of restructuring of the Company's distribution
system, are generally fully utilized.
THE COMPANY'S CURRENT PRINCIPAL FACILITIES ARE AS FOLLOWS:
Lease Expiration
Location - Domestic Sq. Ft. Area (if applicable) (1)
- ------------------- ------------ -------------------
Petaluma, California (2)(3)......... 234,200 July 31, 2004
Marietta, Georgia (8)............... 55,200 Not applicable -
Owned by Company
Oakland, New Jersey (2)(4).......... 120,000 April 1, 2004
South Brunswick, New Jersey (2)(3)
(6)(7)............................ 513,680 May 31, 1999
Reynoldsburg, Ohio (3).............. 77,600 June 30, 1994
Collegeville, Pennsylvania (6)...... 10,835 December 31, 1995
Lakeland, Florida (2)(8)............ 42,500 February 28, 1998
Dayton, New Jersey (5)(8)........... 160,409 October 31, 1997
Summersville, West Virginia (6)(7).. 156,000 Not applicable -
Owned by Company
Bedford Hts., Ohio (6)(7)........... 98,604 January 31, 1995
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Lease Expiration
Location - Foreign Sq. Ft. Area (if applicable)(1)
- ------------------ ------------ ------------------
Chandlers Ford, England (6)......... 10,846 December 24, 2014
Southampton, England (7)............ 60,750 March 24, 2003
Southampton, England (7)............ 51,000 Not applicable -
Owned by Company
Rexdale, Ontario, Canada (6)(7)..... 76,290 May 31, 1997
Rexdale, Ontario, Canada (6)(7)..... 31,453 May 31, 1997
Hong Kong (6)....................... 25,600 Not applicable -
Owned by Company
- -----------------
(1) Not including renewal options.
(2) Properties owned directly or indirectly by Russell Berrie or members of
his immediate family. See ITEM 13 - "CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS".
(3) Regional distribution center.
(4) Corporate headquarters.
(5) Property leased from a partnership of which a director of the Company is a
general partner. See ITEM 13 - "CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS".
(6) Subsidiary (or division) headquarters.
(7) Subsidiary (or division) distribution center.
(8) Facility closed in connection with a restructuring undertaken by the
Company. The Company has subleased the Lakeland facility, and continues
its efforts to sublease or otherwise terminate the lease with regard to
the Dayton facility and has entered into an agreement for sale for the
Marietta facility.
In addition, the Company leases an aggregate of approximately 19,700
square feet of showroom facilities in New York City; Los Angeles and San
Francisco, California; Atlanta, Georgia; Dallas, Texas; Toronto, Montreal and
Vancouver, Canada; Brussels, Belgium; and Utrecht, Holland. The remaining lease
terms at these facilities range between one and eight years.
Fluf N' Stuf, Inc., leases retail store space in shopping and outlet malls
located primarily on the East Coast. The aggregate square footage of these 26
stores is approximately 47,500 square feet. The remaining lease terms at these
facilities range between one and eight years.
ITEM 3. LEGAL PROCEEDINGS
In the ordinary course of its business, the Company is party to various
copyright, patent and trademark infringement, unfair competition, breach of
contract, customs, employment and other legal actions, as plaintiff or
defendant.
As previously reported, on September 27, 1993, the United States Court for
the Southern District of New York issued a decision in a previously reported
action brought by EFS Marketing, Inc. ("EFS") against the Company and Russell
Berrie, its Chairman and Chief Executive Officer, with respect to EFS's and the
Company's product lines of troll dolls. The Court dismissed EFS' claims for
monetary damages and for certain injunctive relief. The Court also invalidated
the copyrights claimed by EFS and the Company in certain of the troll dolls
sold by them; however, the Company does not consider its business materially
dependent on copyright, trademark, or patent protection.
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EFS is seeking reconsideration by the Court of the invalidity of their troll
copyrights. The Company anticipates vigorously pursuing an appeal of this
decision.
The Company believes that the outcome of the proceedings to which it is
currently a party will not have a material adverse effect on its business or
financial condition. (See Note 13 of the Notes to Consolidated Financial
Statements).
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The following table provides information with respect to the executive
officers of the Company. All officers are elected by the Board of Directors
and may be removed with or without cause by the Board.
NAME AGE POSITION WITH THE COMPANY
----------------------- --- ------------------------------
Russell Berrie ........ 61 Chairman of the Board, Chief
Executive Officer and Director
Arnold S. Bloom........ 51 Vice President, Secretary and
General Counsel
Paul Cargotch.......... 49 Vice President - Finance and
Chief Financial Officer
A. Curts Cooke......... 57 President, Chief Operating
Officer and Director
Jimmy Hsu.............. 44 Senior Vice President - Product
Development and Far East
Operations and Director
Y.B. Lee............... 48 Vice President - Far East
Plush Division
Guy M. Lombardo........ 49 Vice President - Administration
and Information Systems
Bernard Tenenbaum...... 39 Vice President - Corporate
Development
Barker T. Torrey, Jr... 63 Senior Vice President -
Operations
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Russell Berrie, the founder of the Company, has been Chairman of the Board
and Chief Executive Officer of the Company since its incorporation in 1966.
Mr. Berrie was also President and Chief Operating Officer of the Company from
its incorporation until October 1988.
Arnold S. Bloom has been employed by the Company as Vice President and
General Counsel since January 1988 and as Secretary since March 1990.
Paul Cargotch has been employed by the Company as Chief Financial Officer
since March 1990 and Vice President - Finance for more than the past five
years.
A. Curts Cooke has been employed as President and Chief Operating Officer
of the Company since March 17, 1990; Executive Vice President of the Company,
from December 1984 and Chief Financial Officer and Secretary of the Company
from 1984 until March 17, 1990. Mr. Cooke has served as a director of the
Company since 1982.
Jimmy Hsu has been employed by the Company as Senior Vice President -
Product Development and Far East Operations since August 1991; he was also Vice
President - Far East Operations from 1977 to August 1991. He has served as a
director of the Company since 1988.
Y.B. Lee has been employed by the Company as either Managing Director or
President - Korean Operations from 1977 to February 1990, when he was elected
Vice President - Far East Plush Division.
Guy M. Lombardo has been employed by the Company as Vice President-
Administration and Information Systems since January 1994; and prior to that,
was Vice President-Management Information Systems for more than the past five
years.
Bernard Tenenbaum has been employed by the Company as Vice
President-Corporate Development since January 14, 1993; he also serves as
President and Chief Executive Officer of a division of the Company which
focuses on the development of sales to mass merchandisers. From September 1988
until joining the Company as an officer, Mr. Tenenbaum was a founding Director
of the George Rothman Institute of Entrepreneurial Studies, Fairleigh Dickenson
University, and was previously Associate Director of the Snider Entrepreneurial
Center of the Wharton School.
Barker T. Torrey, Jr., has been Senior Vice President - Operations for
more than the past five years.
13
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The Company's Common Stock has been traded on the New York Stock Exchange
under the symbol "RUS" since its initial public offering on March 29, 1984.
Prior to that time, there was no public market for the Common Stock. At
December 31, 1993 the Company's Common Stock was held by approximately 941
shareholders of record.
The following table sets forth the high and low sale prices on the New
York Stock Exchange Composite Tape for the calendar periods indicated, as
furnished by the National Quotation Bureau Inc.:
PRICE RANGE OF COMMON STOCK
---------------------------
HIGH LOW
---------- ---------
1993
- ----
First Quarter..................... $19 7/8 $14
Second Quarter.................... 17 13 1/8
Third Quarter..................... 15 1/2 12 3/8
Fourth Quarter.................... 16 5/8 12 7/8
1992
- ----
First Quarter..................... 20 1/8 12
Second Quarter.................... 24 5/8 18
Third Quarter..................... 20 3/8 15 3/4
Fourth Quarter.................... 23 3/8 16 3/4
The Board of Directors declared its first dividend to holders of the
Company's Common Stock in November, 1986. Since then, a cash dividend has been
paid quarterly. The current quarterly rate is $.15 per share. This rate has
been in effect since February 1993. From February 1992 to February 1993 the
quarterly rate was $.117 per share (restated to reflect the 3-for-2 stock split
effective April 1, 1993). The quarterly rate from December 1990 to February
1992 was $.10 (restated). The Board of Directors will review its dividend
policy from time to time and declaration of dividends will remain within its
discretion.
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ITEM 6. SELECTED FINANCIAL DATA
(FOR YEARS ENDED DECEMBER 31,)
(Dollars in Thousands, Except Per Share Data)
SUMMARY OF OPERATIONS 1993 1992 1991 1990 1989 1988
-------- -------- -------- -------- -------- --------
Net Sales $279,111 $444,382 $267,859 $250,579 $246,373 $277,574
Cost of Sales 125,923 176,265 109,857 105,443 105,897 114,109
Income Before
Income Taxes * 17,573 92,999 31,746 23,239 13,745 40,744
Provision for
Income Taxes 4,391 32,651 9,704 5,817 3,961 12,904
Net Income 13,182 60,348 22,042 17,422 9,784 27,840
Net Income Per Share .61 2.70 .98 .77 .43 1.23
Dividends Per Share .60 .47 .40 .70 .27 .27
BALANCE SHEET
Working Capital $178,001 $206,510 $166,538 $154,841 $162,822 $156,874
Property, Plant and
Equipment 28,133 29,577 27,035 34,010 21,277 22,029
Total Assets 259,115 298,847 226,319 216,459 217,106 212,204
Long-Term Debt - - 3,000 4,492 2,689 3,344
Shareholders' Equity 224,034 241,259 196,278 188,380 185,519 181,290
STATISTICAL
Effective Income
Tax Rate 25.0% 35.1% 30.6% 25.0% 28.8% 31.7%
Current Ratio 6.1 4.6 7.2 7.6 6.6 6.7
Return on Average
Shareholders' Equity 5.7% 27.6% 11.5% 9.3% 5.3% 16.3%
Net Profit Margin 4.7% 13.6% 8.2% 7.0% 4.0% 10.0%
Number of Employees 2,126 2,608 2,333 2,569 2,258 2,378
* Includes a restructuring charge of $5.0 million in 1993 and $9.5 million
in 1989.
15
(15)
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS - YEARS ENDED DECEMBER 31, 1993 AND 1992
For the year ended December 31, 1993 the Company's net sales of
$279,111,000 represents a decrease of $165,271,000 or 37.2% compared to the
year ended December 31, 1992. This decrease can be attributed to the
significant reduction of net sales of the Company's Troll product line.
During 1993 net sales of the products associated with the Troll product line
were approximately $86,700,000 or 31.1% of consolidated net sales compared to
approximately $250,000,000 or 56.3% of consolidated net sales during 1992. In
addition, the Company believes that its customers have experienced a general
softness in their business as a result of the growth of mass merchandisers,
factory outlet malls, and warehouse clubs. Included in the results for the
year ended December 31, 1993 are the net sales of $12,653,000 achieved by Cap
Toys, Inc. since its acquisition in October 1993.
Cost of sales was 45.1% of net sales in 1993 compared to 39.7% of net
sales in 1992. This increase can be attributed to the higher gross profit
margins on sales of Troll products during 1992. In addition, certain
components of cost of sales are fixed costs, primarily costs associated with
the sourcing of product in the Far East and provisions for slow moving
inventory, which were absorbed by the higher sales volume in 1992. Also
contributing to the increase are the effects of the reduction of the selling
price of certain of the Company's products in August 1993.
Selling, general and administrative expense was $133,188,000 for the year
ended December 31, 1993 compared to $170,948,000 in 1992, a decrease of
$37,760,000 or 22.1%. This decrease can be primarily attributed to a decrease
in the expenses required to support lower sales levels principally salesforce
commissions (approximately $30,750,000) and to lower expenses related to the
Company's consumer advertising program (approximately $6,200,000).
Included in the results of operations in 1993 is a restructuring charge of
$5,000,000 representing the write-down of certain assets, employee severance
costs and other costs related to the closing and consolidating of distribution
centers and administrative functions. Also included are additional provisions
for future lease obligations relating to a previously closed facility. The
restructuring charge resulted in an after tax effect on net income of
$3,150,000 or $.15 per share. This restructuring, in addition to a reduction
in the salesforce, is expected to result in an annualized savings in selling,
general and administrative expense of approximately $10,000,000.
16
(16)
The provision for income taxes as a percentage of income before taxes
decreased to 25.0% in 1993 compared to 35.1% in 1992. The lower effective rate
can be attributed to an increased relative benefit associated with investment
income resulting from tax- advantaged investments within the Company's
short-term investment portfolio, an increased proportion of income before
income taxes related to certain foreign subsidiaries with lower tax provisions
and to an increased relative benefit for deductions permitted on contribution
to charitable organizations.
Net income of $13,182,000 for 1993 decreased by $47,166,000 when compared
to 1992. The decrease in net income can be attributed to the decrease in net
sales, partially offset by the decrease in selling, general and administrative
expense.
RESULTS OF OPERATIONS - YEARS ENDED DECEMBER 31, 1992 AND 1991
For the year ended December 31, 1992 the Company's net sales of
$444,382,000 represents an increase of 65.9% from the year ended December 31,
1991. This increase can be attributed to the success of the Company's Troll
product line. During 1992 net sales of the various products associated with
the Troll product line were approximately $250,000,000 or 56.3% of consolidated
net sales. This compares to sales of these products of approximately
$44,400,000 or 16.6% of consolidated net sales during 1991. The Company
continues to introduce new products associated with the Troll product line,
however the Company is unable to forecast the future sales levels of this
product line.
Cost of sales was 39.7% of net sales in 1992 compared to 41.0% of net
sales in 1991. This decrease can be primarily attributed to higher gross
profit margins on sales of Troll products as compared to the average gross
profit margin generated by the Company's other product lines. In addition,
some components of the cost of sales are fixed costs, which were absorbed by
the higher sales volume during 1992.
Selling, general and administrative expense was $170,948,000 for the year
ended December 31, 1992 compared to $130,216,000 in 1991, an increase of
$40,732,000 or 31.3%. However, as a result of the increase in net sales,
selling, general and administrative expense as a percentage of net sales
decreased to 38.5% for the year ended December 31, 1992 compared to 48.6% in
1991. The increase of $40,732,000 can be primarily attributed to increased
expenses (approximately $26,900,000) necessary to support the higher level of
sales, consisting primarily of increased salesforce compensation (principally
commissions based on sales), expenses related to the consumer advertising
program implemented in 1992 (approximately $11,000,000) and to an additional
provision required for future lease payments related to facilities previously
closed pursuant to a restructuring implemented in 1989 (approximately
$2,800,000).
17
(17)
The year ended December 31, 1992 includes a charge of $6,300,000 which
represents a provision for damages awarded to a former employee by a jury, in
February 1993, based on allegations that she was slandered and other pending
claims by the plaintiff. The Company believes that the verdict is not
supported by the evidence and the claims are without merit. The Company will
vigorously pursue its position before the trial court and appeals process.
Investment and other income-net was $2,130,000 for the year ended December
31, 1992 compared to $3,960,000 in the prior year. The year ended December 31,
1991 includes a gain of approximately $2,000,000 related to the sale of an
office facility in Hong Kong.
The provision for income taxes, as a percentage of income before taxes,
increased to 35.1% in 1992 compared to 30.6% in 1991. The higher effective
rate in 1992 can be attributed in part to provisions for U.S. Federal income
tax on unremitted earnings of foreign subsidiaries, which are not considered to
be permanently reinvested. Additionally, the effective rate in 1991 was
affected by the gain on the sale of an office facility in Hong Kong which was
not subject to taxation. (See Note 1 of the Notes to Consolidated Financial
Statements for Accounting for Income Taxes).
Net income for 1992 increased by $38,306,000 to $60,348,000 when compared
to 1991. The increase in net income can be attributed to the increase in net
sales offset by the increase in selling, general and administrative expense.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1993 the Company had cash and cash equivalents and
short-term investments of $82,899,000 compared to $92,727,000 at December 31,
1992.
The Company generated net cash flows from operating activities of
$50,477,000 resulting from net income of $13,182,000, a decrease in accounts
receivable of $34,509,000, and a decrease in inventories of $17,207,000. This
was offset by a decrease in accrued expenses of $10,495,000 and a decrease in
accrued income tax of $10,886,000. The decrease in accounts receivable is
attributable to the lower level of sales in the fourth quarter of 1993 compared
to the fourth quarter of 1992. The decrease in inventories can be primarily
attributed to the Company's efforts to control inventory levels given the lower
level of sales.
During the year ended December 31, 1993 funds of $24,175,000 were used for
the acquisition of Cap Toys, Inc. Funds were also used for the purchase of
treasury stock (under a stock repurchase program) of $22,214,000 and the
payment of dividends of $12,797,000.
18
(18)
The Company has available $87,811,000 in bank lines of credit that provide
for direct borrowings and letters of credit used for the purchase of inventory.
At December 31, 1993 letters of credit of $17,511,000 were outstanding. There
were no direct borrowings under the bank lines of credit. Working capital
requirements during 1993 were met entirely through internally generated funds.
The Company remains in a highly liquid position and believes that the resources
available from operations and bank lines of credit are sufficient to meet the
foreseeable requirements of its business.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Russ Berrie and Company, Inc.:
We have audited the accompanying consolidated balance sheet of Russ Berrie and
Company, Inc. as of December 31, 1993 and 1992, and the related consolidated
statements of income, shareholders' equity, and cash flows for each of the
three years in the period ended December 31, 1993. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Russ Berrie and
Company, Inc. as of December 31, 1993 and 1992, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1993 in conformity with generally accepted accounting
principles.
As discussed in Note 1 to the consolidated financial statements, effective
January 1, 1992, the Company changed its method of accounting for income taxes.
COOPERS & LYBRAND
Parsippany, New Jersey
February 7, 1994
19
(19)
CONSOLIDATED STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1993 1992 1991
-------- -------- --------
Net sales ................................... $279,111 $444,382 $267,859
Cost of sales................................ 125,923 176,265 109,857
------- ------- -------
GROSS PROFIT.............................. 153,188 268,117 158,002
Selling, general and administrative expense.. 133,188 170,948 130,216
Litigation................................... - 6,300 -
Restructuring charge......................... 5,000 - -
Investment and other income - net ........... 2,573 2,130 3,960
------- ------- -------
INCOME BEFORE INCOME TAXES................ 17,573 92,999 31,746
Provision for income taxes................... 4,391 32,651 9,704
------- ------- -------
NET INCOME................................ $ 13,182 $ 60,348 $ 22,042
======= ======= ======
NET INCOME PER SHARE......................... $ .61 $ 2.70 $ .98
======= ======= =======
The accompanying notes are an integral part of the consolidated financial
statements.
20
(20)
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
ADDITIONAL FOREIGN
COMMON PAID RETAINED CURRENCY TREASURY
STOCK IN CAPITAL EARNINGS TRANSLATION STOCK
----- ---------- -------- ----------- -----
Balance at December 31, 1990..... $ 2,261 $ 20,676 $162,348 $ 3,423 $ (328)
Net income....................... - - 22,042 - -
Share transactions under
stock option plans............. 5 419 - - -
Cash dividends ($.40 per share).. - - (8,969) - -
Foreign currency
translation adjustment......... - - - (353) -
Transactions in treasury shares.. - - - - (5,246)
-------- -------- -------- -------- --------
Balance at December 31, 1991..... 2,266 21,095 175,421 3,070 (5,574)
Net income....................... - - 60,348 - -
Share transactions under
stock option plans............. 82 10,282 - - -
Cash dividends ($.47 per share).. - - (10,504) - -
Foreign currency
translation adjustment......... - - - (5,158) -
Transactions in treasury shares.. - - - - (10,069)
-------- -------- -------- -------- --------
Balance at December 31, 1992..... 2,348 31,377 225,265 (2,088) (15,643)
Net income....................... - - 13,182 - -
Share transactions under
stock option plans............. 40 5,463 - - -
Cash dividends ($.60 per share).. - - (12,797) - -
Foreign currency
translation adjustment......... - - - (899) -
Transactions in treasury shares.. - - - - (22,214)
-------- -------- -------- -------- --------
Balance at December 31, 1993..... $ 2,388 $ 36,840 $225,650 $ (2,987) $(37,857)
======== ======== ======== ======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
21
(21)
CONSOLIDATED BALANCE SHEET
AT DECEMBER 31
(Dollars in Thousands)
1993 1992
------ ------
ASSETS
- ------
Current assets
Cash and cash equivalents.................... $ 51,478 $ 62,285
Short-term investments....................... 31,421 30,442
Accounts receivable, trade, less allowance
for doubtful accounts: 1993, $3,830;
1992, $5,229............................... 46,899 77,692
Inventories.................................. 66,110 80,338
Prepaid expenses and other current assets.... 5,005 2,745
Deferred income taxes........................ 12,169 10,596
------- -------
TOTAL CURRENT ASSETS................. 213,082 264,098
Property, plant and equipment - net............ 28,133 29,577
Goodwill and other intangible assets - net..... 16,420 3,801
Other assets................................... 1,480 1,371
------- -------
TOTAL ASSETS......................... $259,115 $298,847
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current liabilities
Current portion of long-term debt............ $ - $ 3,000
Accounts payable............................. 5,235 6,872
Accrued expenses............................. 23,171 32,977
Accrued restructuring costs.................. 6,283 3,460
Accrued income taxes......................... 392 11,279
------- ------
TOTAL CURRENT LIABILITIES............ 35,081 57,588
Shareholders' equity
Common stock: $.10 stated value; authorized
50,000,000 shares; issued 1993, 23,876,274
shares; 1992, 23,481,312 shares............ 2,388 2,348
Additional paid in capital................... 36,840 31,377
Retained earnings............................ 225,650 225,265
Foreign currency translation adjustments..... (2,987) (2,088)
Treasury stock, at cost
(1993, 2,454,813 shares;
1992, 1,183,200 shares).................... (37,857) (15,643)
------- -------
TOTAL SHAREHOLDERS' EQUITY........... 224,034 241,259
------- -------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY................. $259,115 $298,847
======= =======
The accompanying notes are an integral part of the consolidated financial
statements.
22
(22)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31
(Dollars in Thousands)
1993 1992 1991
------ ------ ------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $13,182 $60,348 $22,042
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation................................ 5,172 5,525 5,943
Amortization of intangible assets........... 1,193 1,067 587
Provision for bad debts..................... 2,198 4,973 3,413
Gains or losses from sale or disposal
of fixed assets........................... (203) 570 (1,085)
Changes in assets and liabilities
Accounts receivable....................... 34,509 (17,598) (7,603)
Inventories............................... 17,207 (19,377) 3,676
Deferred income taxes..................... (1,573) (2,597) (1,048)
Prepaid expenses and other current assets. (912) 842 151
Goodwill and other intangible assets...... (205) (418) (2,675)
Other assets.............................. 87 (165) 513
Accounts payable.......................... (1,620) 2,013 (1,516)
Accrued expenses.......................... (10,495) 19,023 3,134
Accrued restructuring costs............... 2,823 1,924 (844)
Accrued income taxes...................... (10,886) 7,325 2,784
------ ------ -------
Total adjustments....................... 37,295 3,107 5,430
------ ------ -------
Net cash provided by
operating activities.................. 50,477 63,455 27,472
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments........... (979) (30,442) -
Proceeds from sale of fixed assets............ 1,928 314 5,771
Capital expenditures.......................... (5,190) (10,130) (3,526)
Acquisition................................... (24,175) - -
------ ------ -------
Net cash provided by (used in)
investing activities.................. (28,416) (40,258) 2,245
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of long-term debt.................... (3,000) (1,000) (1,939)
Issuance of common stock...................... 5,503 10,364 424
Dividends..................................... (12,797) (10,504) (8,969)
Transactions in treasury shares............... (22,214) (10,069) (5,246)
------ ------ ------
Net cash (used in) financing
activities............................ (32,508) (11,209) (15,730)
Effect of exchange rate....................... (360) (1,090) (1,105)
------ ------ ------
Net increase (decrease) in cash and
cash equivalents.............................. (10,807) 10,898 12,882
Cash and cash equivalents at beginning of year.. 62,285 51,387 38,505
------ ------ ------
Cash and cash equivalents at end of year........ $51,478 $62,285 $51,387
====== ====== ======
CASH PAID DURING THE YEAR FOR:
Interest.................................... $ 531 $ 392 $ 781
Income taxes................................ $16,851 $28,674 $ 7,789
The accompanying notes are an integral part of the consolidated financial
statements.
23
(23)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES:
PRINCIPALS OF CONSOLIDATION
The consolidated financial statements include the accounts of Russ Berrie
and Company, Inc. and its wholly-owned subsidiaries (collectively, the
"Company") after elimination of intercompany accounts and transactions.
ADVERTISING COSTS
Production costs for advertising are charged to operations in the year the
related advertising campaign begins. All other advertising costs are charged
to results of operations during the year in which they are incurred.
CASH EQUIVALENTS
Cash equivalents consist of investments in interest bearing accounts and
highly liquid securities having a maturity of three months or less.
SHORT-TERM INVESTMENTS
Short-term investments consist of highly liquid obligations with a
maturity of more than three months when purchased. The Company uses these
short-term investments as part of its cash management program. Short-term
investments are stated at cost plus accrued interest, which approximates
market.
INVENTORIES
Inventories, which mainly consist of finished goods, are stated at the
lower of cost (first-in, first-out) or market value.
PROPERTY
Property, plant and equipment are stated at cost and are depreciated using
the straight-line method over their estimated useful lives which range from
three to eighteen years. Leasehold improvements are amortized using the
straight-line method over the term of the respective lease or asset life,
whichever is shorter. Expenditures for maintenance and repairs are charged to
operations as incurred. Gain or loss on retirement or disposal of individual
assets is recorded as income or expense.
24
(24)
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill, which represents the excess of purchase price of acquired assets
over the fair market value of net assets acquired, is being amortized using the
straight-line method, over fifteen years or less. Other intangible assets
acquired are being amortized over the period for which benefit is derived which
ranges from two to six years. Accumulated amortization was $3,876,000 and
$2,683,000 at December 31, 1993 and 1992, respectively.
FOREIGN CURRENCY TRANSLATION
Aggregate foreign exchange gains or losses resulting from the translation
of those foreign currency financial statements which are denominated in the
local currency of each foreign subsidiary are recorded as a separate component
of shareholders' equity. Gains and losses from foreign currency transactions
are included in investment and other income-net.
ACCOUNTING FOR INCOME TAXES
For the year ended December 31, 1992 the Company adopted the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes".
NET INCOME PER SHARE
Net income per share is based on the weighted average number of shares
outstanding during the year. The number of shares used in the computation at
December 31, 1993, 1992 and 1991 were 21,470,672, 22,391,739 and 22,452,033,
respectively.
LEASES
Capital leases are recorded at amounts equal to the lesser of the present
value of the minimum lease payments or the fair value of the leased properties
at the beginning of the respective lease terms. Such assets are being
amortized on the straight-line basis over the related lease terms or life of
asset, whichever is shorter. Interest expense relating to the lease
liabilities is recorded to reflect constant rates of interest over the terms of
the leases. Operating lease rentals are charged to operating expense as
incurred.
POST-EMPLOYMENT BENEFITS
In November 1992, Statement of Financial Accounting Standards No. 112 was
issued which establishes the method of accounting for post-employment benefits
which must be implemented by the year ended December 31, 1994. The impact of
such adoption on the consolidated financial statements is not expected to be
material.
25
(25)
FOREIGN CURRENCY CONTRACTS
The Company enters into forward exchange contracts and currency options,
principally to hedge the purchase of inventory by its foreign subsidiaries.
Gains and losses are reported as a component of the related transactions. The
Company does not speculate in foreign currencies. At December 31, 1993 the
aggregate amount of foreign exchange contracts was $1,000,000.
ACQUISITION
In October 1993, the Company completed the acquisition of substantially
all of the assets, including inventory and accounts receivable of Cap Toys,
Inc., a toy company based in Cleveland, Ohio. The acquisition, accounted for
as a purchase, was funded entirely by the Company's cash and $13,606,000 of
goodwill was recorded. Additional payments may be required based upon the
attainment of certain future operating profit levels of Cap Toys, Inc. Amounts
related to additional payments will be accrued and charged to goodwill when
they become earned.
RECLASSIFICATION
Certain 1992 and 1991 amounts have been reclassified to conform with the
1993 presentation.
NOTE 2 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
DECEMBER 31,
-------------------------------------
1993 1992
--------- ----------
Land............................ $ 6,068,000 $ 6,400,000
Buildings....................... 11,033,000 11,640,000
Machinery and equipment......... 22,152,000 23,820,000
Furniture and fixtures.......... 6,022,000 5,773,000
Leasehold improvements.......... 8,413,000 8,783,000
---------- ----------
$53,688,000 $56,416,000
Less, Accumulated depreciation
and amortization............... 25,555,000 26,839,000
---------- ----------
$28,133,000 $29,577,000
========== ==========
NOTE 3 - LINES OF CREDIT
Under its existing domestic bank lines of credit, the Company has
available $75,000,000 of direct borrowings and letters of credit at any one
time.
The maximum amount available to the Company's foreign operations at
December 31, 1993 under local lines of credit is $12,811,000. These lines,
which are guaranteed by the Company, provide for direct borrowings, letters of
credit, and overdraft facilities.
26
(26)
In connection with the purchase of imported merchandise, the Company, at
December 31, 1993, had letters of credit outstanding of $17,511,000.
NOTE 4 - ACCRUED EXPENSES
Accrued expenses at December 31, 1993 and 1992 include accrued sales
commissions of $2,110,000 and $9,243,000, respectively. Accrued expenses at
December 31, 1993 and 1992 also include accrued litigation of $6,300,000 (see
Note 13).
NOTE 5 - RESTRUCTURING COSTS
A restructuring charge of $5,000,000 was recorded in the year ended
December 31, 1993. This charge includes the write-down of certain assets,
employee severance costs and other incremental costs related to the closing,
moving and consolidating of distribution and administrative functions. Also,
additional provisions for future lease obligations related to a previously
closed facility leased from a partnership in which a director of the Company is
a general partner (see Note 8), are included in such restructuring charge.
NOTE 6 - INVESTMENT AND OTHER INCOME - NET
The significant components of investment and other income - net for the
years ended December 31, 1993, 1992, and 1991 are shown as follows:
1993 1992 1991
---------- ---------- -----------
Investment income $3,033,000 $2,647,000 $2,368,000
Interest expense (617,000) (470,000) (756,000)
Gain on sale of office
facility in Hong Kong - - 2,000,000
Foreign currency transactions (583,000) (582,000) 56,000
Other 740,000 535,000 292,000
---------- ---------- ----------
$2,573,000 $2,130,000 $3,960,000
========== ========== ==========
27
(27)
NOTE 7 - INCOME TAXES
The Company and its domestic subsidiaries file a consolidated Federal
income tax return.
Income before income taxes was:
YEARS ENDED DECEMBER 31,
-----------------------------------------------
1993 1992 1991
---- ---- ----
United States $ 7,140,000 $ 60,039,000 $ 17,768,000
Foreign 10,433,000 32,960,000 13,978,000
------------ ------------ -------------
$ 17,573,000 $ 92,999,000 $ 31,746,000
============ ============ =============
The provision for income taxes consists of the following:
YEARS ENDED DECEMBER 31,
-----------------------------------------------
CURRENTLY PAYABLE: 1993 1992 1991
---- ---- ----
Federal................. $ 2,785,000 $ 22,614,000 $ 6,459,000
Foreign................. 2,653,000 9,318,000 3,273,000
State................... 526,000 3,316,000 1,020,000
------------ ------------ -------------
5,964,000 35,248,000 10,752,000
------------ ------------ -------------
DEFERRED:
Federal................. (1,572,000) (2,313,000) (1,303,000)
Foreign................. (30,000) 92,000 386,000
State................... 29,000 (376,000) (131,000)
------------ ------------ -------------
(1,573,000) (2,597,000) (1,048,000)
------------ ------------ -------------
$ 4,391,000 $ 32,651,000 $ 9,704,000
============ ============ =============
A reconciliation between the U.S. statutory rate and the effective rate is
shown below:
1993 1992 1991
---- ---- ----
U.S. Federal statutory rate....... 35.0% 34.0% 34.0%
State income tax net of Federal
tax benefit..................... 1.9% 2.2% 2.1%
Foreign rate differences.......... (5.9%) (1.8%) (3.4%)
Charitable contributions.......... (5.1%) (1.3%) (1.4%)
Tax advantaged investment income.. (3.2%) (0.5%) (1.8%)
Provision for foreign dividends... 6.8% 1.8% -
Change in enacted rates........... (2.4%) - -
Other, net........................ (2.1%) 0.7% 1.1%
------ ------ ------
Effective income tax rate......... 25.0% 35.1% 30.6%
====== ====== ======
28
(28)
The components of the net deferred tax asset, net of a valuation
allowance of $750,000, resulting from differences between accounting for
financial reporting purposes and accounting for tax purposes were as follows:
ASSETS:
1993 1992
-------- --------
Inventory capitalization................ $ 2,940,000 $ 3,309,000
Reserves not deducted for tax purposes.. 5,440,000 4,195,000
Accrued restructuring costs............. 2,345,000 1,293,000
Litigation.............................. 2,856,000 2,632,000
Charitable contribution carryforward.... 1,624,000 569,000
Other................................... 432,000 1,085,000
------------ -----------
15,637,000 13,083,000
LIABILITIES:
Depreciation............................ 468,000 687,000
Unremitted earnings of foreign
subsidiaries........................... 3,000,000 1,800,000
------------ -----------
3,468,000 2,487,000
------------ -----------
Net deferred tax asset.................. $ 12,169,000 $ 10,596,000
============ ===========
Provisions are made for estimated United States and foreign income
taxes, less available tax credits and deductions, which may be incurred on the
remittance of foreign subsidiaries' undistributed earnings less those earnings
deemed to be permanently reinvested.
NOTE 8 - RELATED PARTY TRANSACTIONS
Certain buildings, referred to in Note 9, are leased from Russell
Berrie, the Company's majority shareholder, or entities owned or controlled by
him. Rentals under these leases for the years ended December 31, 1993, 1992
and 1991 were $4,406,000, $4,133,000 and $4,065,000, respectively. The Company
is also a guarantor under two mortgages for property so leased with a principal
amount aggregating approximately $8,455,000 as of December 31, 1993, $2,000,000
of which is collateralized by assets of the Company.
The Company also leases a facility from a partnership in which a
director of the Company is a general partner. Annual rentals under this lease
agreement for the years ended December 31, 1993, 1992, and 1991 were $996,000,
$831,000 and $797,000, respectively. This facility is included in the estimate
for future lease obligations with respect to the accrued restructuring costs
(see Note 5).
29
(29)
NOTE 9 - LEASES
At December 31, 1993, the Company and its subsidiaries are obligated
under operating lease agreements (principally for buildings and other leased
facilities) for remaining lease terms ranging from one to twenty-one years.
Rent expense for the years ended December 31, 1993, 1992 and 1991,
amounted to $8,456,000, $8,167,000 and $8,318,000, respectively.
The approximate aggregate future rental payments as of December 31, 1993
under operating leases are as follows:
1994............................ $9,208,000
1995............................ 8,347,000
1996............................ 7,875,000
1997............................ 6,757,000
1998............................ 4,754,000
Later years..................... 10,476,000
NOTE 10 - STOCK OPTION AND EMPLOYEE STOCK PURCHASE PLANS
The Company has three stock option plans and an employee stock purchase
plan. At December 31, 1993, the existing plans terminated and, on January 1,
1994, the 1994 Stock Option Plans and the 1994 Employee Stock Purchase Plan
become effective. As of December 31, 1992, there were 2,126,276 shares of
common stock reserved for issuance of options under all plans. There are
3,800,000 shares of common stock reserved for issuance of options under all the
1994 stock plans. There are outstanding options under prior plans; however,
these plans have been terminated and no additional options can be granted. The
option price for all stock option plans is equal to the closing price of the
stock as of the date the option is granted and no options may be exercised
within one year from the date of grant.
30
(30)
Options are exercisable at prices ranging from $9.34 to $21.17 per
share under the various plans. The exercise price of options exercised during
1993 ranged from $11.09 to $16.17. Summarized stock option data follows:
Stock Stock
Option Option
And Plans For
Stock Restricted Outside
Option Plans Stock Plans* Directors*
------------ ------------ ----------
Outstanding as of
December 31, 1990... 967,689 109,381 45,000
Granted during the year.... 426,404 50,273 15,000
Exercised during the year.. (8,796) - -
Cancelled during the year.. (105,023) - -
------- ------- ------
Outstanding as of
December 31, 1991... 1,280,274 159,654 60,000
Granted during the year.... 318,338 43,229 15,000
Exercised during the year.. (693,162) (63,909) (15,000)
Cancelled during the year.. (41,573) - -
Surrendered upon exercise
of SARs............. - (31,871) (3,000)
--------- ------- -------
Outstanding as of
December 31, 1992 863,877 107,103 57,000
Granted during the year ... 455,453 30,391 15,000
Exercised during the year.. (285,729) (51,592) -
Cancelled during the year.. (101,481) - -
--------- ------- -------
Outstanding as of
December 31, 1993 932,120 85,902 72,000
========= ======= =======
* These plans allowed for the granting of Stock Appreciation Rights
(SARs). The SARs, which relate to specific options under the plans, permit the
participant to exercise the SAR and be entitled to an amount equal to the
excess of the closing market price of Russ Berrie and Company, Inc. Common
Stock on the date of exercise over the exercise price of the related option.
Under the Employee Stock Purchase Plan, the option price is 90% of the
closing market price of the stock on the first business day of the plan year.
During 1993, 1,292 shares were acquired under this plan. The 1994 Employee
Stock Purchase Plan has 150,000 shares reserved for future issuance.
NOTE 11 - RETIREMENT PLAN
The Company has a non-contributory retirement plan for substantially all
employees which provides for contributions by the Company, on a calendar year
basis, in such amounts (subject to certain maximum limitations) as the Board of
Directors may determine.
31
(31)
The provisions for contributions charged to operations for the years
ended December 31, 1993, 1992 and 1991 were $1,991,000, $2,384,000 and
$1,868,000, respectively.
NOTE 12 - GEOGRAPHIC AREAS
The Company is in one line of business and generates revenue from
operating entities worldwide. Financial data by geographic area are presented
below:
REVENUES: 1993 1992 1991
----------- ----------- -----------
United States........... $213,101,000 $344,952,000 $212,140,000
Europe.................. 33,230,000 52,831,000 27,988,000
Other Foreign........... 32,780,000 46,599,000 27,731,000
----------- ----------- -----------
Consolidated............ $279,111,000 $444,382,000 $267,859,000
----------- ----------- -----------
NET INCOME:
United States........... $ 5,372,000 $36,798,000 $11,723,000
Europe.................. 2,434,000 9,696,000 3,189,000
Other Foreign........... 5,376,000 13,854,000 7,130,000
---------- ---------- ----------
Consolidated............ $13,182,000 $60,348,000 $22,042,000
---------- ---------- ----------
IDENTIFIABLE ASSETS:
United States........... $189,385,000 $218,571,000 $176,958,000
Europe.................. 30,877,000 38,507,000 23,272,000
Other Foreign........... 38,853,000 41,769,000 26,089,000
----------- ----------- -----------
Consolidated............ $259,115,000 $298,847,000 $226,319,000
----------- ----------- -----------
NOTE 13 - LITIGATION
The Company is subject to legal proceedings and claims which arise in
the ordinary course of its business. In the opinion of management, the amount
of ultimate liability with respect to these actions will not materially affect
the results of operations or the financial position of the Company.
For the year ended December 31, 1992, the Company reserved $6,300,000
relating to an award by a jury in February 1993 for slander and other pending
claims made by the plaintiff. It is the opinion of the Company that the
verdict is not supported by the evidence and the claims are without merit. The
Company will vigorously defend its position before the trial court and, if
necessary, on appeal.
32
(32)
NOTE 14 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following selected financial data for the eight quarters ended
December 31, 1993 are derived from unaudited financial statements and include,
in the opinion of management, all adjustments necessary for fair presentation
of the results for the interim periods presented and are of a normal recurring
nature. However, the quarter ended December 31, 1993 includes a restructuring
charge of $5,000,000 ($3,150,000 or $.15 per share after taxes) and a provision
for slow moving inventory of $4,380,000 ($2,760,000 or $.13 per share after
taxes):
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
FOR QUARTERS ENDED
---------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
--------- -------- --------- --------
1993
- ----
Net sales............ $ 96,310 $ 49,887 $ 70,738 $ 62,176
Gross profit........ 58,575 27,099 40,459 27,055
Net income (loss).... 13,634 (3,001) 6,322 (3,773)
Net income (loss)
per share........... $ 0.62 $ (0.14) $ 0.30 $ (0.18)
1992
- ----
Net sales............ $ 96,408 $ 86,341 $152,089 $109,544
Gross profit......... 58,228 51,601 96,106 62,182
Net income........... 12,823 9,227 28,895 9,403
Net income per share. $ 0.57 $ 0.41 $ 1.29 $ 0.43
NOTE 15 - STOCK SPLIT:
On February 11, 1993 the Company's Board of Directors approved a
three-for-two common stock split effective April 1, 1993 for shareholders of
record as of March 15, 1993. All numbers of common shares and per share data,
except shares authorized, throughout the consolidated financial statements,
have been restated to reflect the stock split.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
33
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information relating to this item appears under the caption "ELECTION OF
DIRECTORS" on pages 1 and 2 of the 1994 Proxy Statement, which is incorporated
herein by reference and under the caption "EXECUTIVE OFFICERS OF THE
REGISTRANT" on pages 11 and 12 of this Annual Report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
Information relating to this item appears under the caption "THE BOARD
OF DIRECTORS AND COMMITTEES OF THE BOARD" on pages 3 through 5, "EXECUTIVE
COMPENSATION" on pages 9 through 11 and "COMPENSATION COMMITTEE REPORT" on
pages 5 and 6 in the 1994 Proxy Statement, which are incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
Information relating to this item appears under the captions "SECURITY
OWNERSHIP OF MANAGEMENT" and "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS"
on page 8 and 9 of the 1994 Proxy Statement, which are incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information relating to this item appears under the captions "EXECUTIVE
COMPENSATION" on pages 9 through 11, "CERTAIN TRANSACTIONS" on pages 11 through
13 and "COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION" on page 6
of the 1994 Proxy Statement, which are incorporated herein by reference.
34
(34)
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND
REPORTS ON FORM 8-K
(A) DOCUMENTS FILED AS PART OF THIS REPORT.
1. FINANCIAL STATEMENTS:
Page Number
in this
Report
------
Report of Independent Accountants............. 18
Consolidated Statement of Income for the
years ended December 31, 1993, 1992 and 1991.. 19
Consolidated Statement of Changes in
Shareholders' Equity for the years ended
1993, 1992 and 1991........................... 20
Consolidated Balance Sheet at December 31,
1993 and 1992................................. 21
Consolidated Statement of Cash Flows for the
years ended December 31, 1993, 1992 and 1991.. 22
Notes to Consolidated Financial Statements.... 23-32
- --------------------
2. FINANCIAL STATEMENT SCHEDULES:
Schedule I - Marketable securities -
other investments......... S-1
Schedule VIII - Valuation and qualifying
accounts.................. S-2
- --------------------
Other schedules are omitted because they are either not applicable or not
required or the information is presented in the Consolidated Financial
Statements or Notes thereto.
35
(35)
3. EXHIBITS:
Exhibit No.
- -----------
3.1(a) Restated Certificate of Incorporation of the Registrant
and amendment thereto. (9)
(b) Certificate of Amendment to Restated Certificate of
Incorporation of the Company filed April 30, 1987.
(23)
3.2(a) By-Laws of the Registrant. (9)
(b) Amendment to Revised By-Laws of the Company adopted
April 30, 1987. (23)
(c) Amendment to Revised By-Laws of the Company adopted
February 18, 1988. (23)
4.1 Form of Common Stock Certificate. (1)
10.1(a) Russ Berrie and Company, Inc. Stock Option and Restricted
Stock Plan. (2)
(b) Amendment to the Russ Berrie and Company, Inc. Stock
Option and Restricted Stock Plan. (11)
10.2(a) Russ Berrie and Company, Inc. Stock Option Plan for
Outside Directors. (3)
(b) Amendment to the Russ Berrie and Company, Inc. Stock
Option Plan for Outside Directors. (11)
10.3 Russ Berrie and Company, Inc. Profit Sharing Plan. (3)
10.4 Agreement dated January 26, 1982 between the Registrant
and A. Curts Cooke and amendment thereto dated
March 10, 1984. (3)
- -------------------
(1) Incorporated by reference to Amendment No. 2 to Registration Statement
No. 2-88797 on Form S-1, as filed on March 29, 1984.
(2) Incorporated by reference to Annual Report on Form 10-K for the year ended
December 31, 1984.
(3) Incorporated by reference to Amendment No. 1 to Registration Statement No.
2-88797 on Form S-1, as filed on March 13, 1984.
(9) Incorporated by reference to Amendment No. 1 to Registration Statement No.
33-10077 on Form S-1, as filed on December 16, 1986.
(11) Incorporated by reference to Annual Report on Form 10-K for the year ended
December 31, 1987.
(23) Incorporated by reference to Registration No. 33-51823 on Form S-8, as
filed on January 6, 1994.
36
(36)
Exhibit No.
- -----------
10.26 Lease Agreement, dated April 1, 1981, between Tri-State
Realty and Investment Company and Russ Berrie and
Company, Inc. (4)
10.27 Guaranty, dated March 20, 1981, from Russ Berrie and
Company, Inc. and Russell Berrie to the New
Jersey Economic Development Authority and
Midlantic National Bank as Trustee. (4)
10.28 Mortgage, dated April 6, 1981, between Tri-State Realty
and Investment Company and the New Jersey Economic
Development Authority. (4)
10.29 Credit and Security Agreement, dated as of March 1, 1981,
between the New Jersey Economic Development
Authority and Tri-State Realty and Investment
Company. (4)
10.30 Assignment of Leases, Rents & Profits, dated April 6,
1981, by Tri-State Realty and Investment Company
to the New Jersey Economic Development Authority.
(4)
10.31 Note, dated April 6, 1981, made by Tri-State Realty and
Investment Company to the order of the New Jersey
Economic Development Authority in the principal
amount of $2,000,000. (4)
10.32 Specimen of State of New Jersey Economic Development
Authority $2,000,000 Economic Development Bond
(Tri-State Realty and Investment Company -- 1980
Project), dated April 6, 1981. (4)
10.33 Lease, dated December 28, 1983, between Russell
Berrie and Russ Berrie and Company, Inc. (4)
- -----------------
(4) Incorporated by reference to Registration Statement No. 2-88797
on Form S-1 as filed on February 2, 1984.
37
(37)
Exhibit No.
- -----------
10.35 Guarantee dated as of December 1, 1983, from Russ Berrie
and Company, Inc. to the New Jersey Economic
Development Authority, Bankers Trust Company as
Trustee and each Holder of a Bond. (4)
10.36 Letter of Credit and Reimbursement Agreement, dated as of
December 1, 1983, between Russ Berrie and Company,
Inc. and Citibank, N.A. (4)
10.37 Loan Agreement, dated as of December 1, 1983, between
the New Jersey Economic Development Authority and
Russell Berrie. (4)
10.38 Mortgage, dated December 28, 1983, between Russell Berrie
and Citibank, N.A. (4)
10.39 Form of New Jersey Economic Development Authority
Variable/Fixed Rate Economic Development Bond
(Russell Berrie -- 1983 Project). (4)
10.51 Grant Deed, dated June 28, 1982, from Russ Berrie and
Company, Inc. to Russell Berrie. (1)
10.52 Russ Berrie and Company, Inc. 1989 Employee Stock
Purchase Plan. (13)
- ----------------
(1) Incorporated by reference to Amendment No. 2 to Registration
Statement No. 2-88797 on Form S-1, as filed on March 29, 1984.
(4) Incorporated by reference to Registration Statement No. 2-88797 on
Form S-1, as filed on February 2, 1984.
(13) Incorporated by reference to Form S-8 Registration Statement No.
33-26161, as filed on December 16, 1988.
38
(38)
Exhibit No.
- -----------
10.53(a) Russ Berrie and Company, Inc. Stock Option Plan. (6)
(b) Amendments to the Russ Berrie and Company, Inc. Stock
Option Plan. (11)
10.55 Executive Employment Agreement, dated May 21, 1982,
between Russ Berrie and Company, Inc. and
James Madonna and Amendment thereto, dated
September 23, 1986. (9)
10.68(a) Lease Agreement, dated as of May 1, 1977, between Fred T.
Reisman and Associates Limited, Amram's
Distributing, LTD, and Alfa Romeo (Canada)
Limited (8)
(b) Lease Agreement, dated April 8, 1986, between Pensionfund
Realty Limited and Amram's Distributing LTD. (9)
10.70 Amendment, dated October 29, 1985 to the restated Russ
Berrie and Company, Inc. Profit Sharing Plan. (8)
- ----------------
(6) Incorporated by reference to Post-Effective Amendment No. 1 to
Registration Statement No. 2-96238 on Form S-8, as filed on
November 6, 1985.
(8) Incorporated by reference to Annual Report on Form 10-K for the
year ended December 31, 1985.
(9) Incorporated by reference to Amendment No. 1 to Registration
Statement No. 33-10077 of Form S-1, as filed on December 16, 1986.
(11) Incorporated by reference to Annual Report on Form 10-K for the
year ended December 31, 1987.
39
(39)
Exhibit No.
- -----------
10.73 Russ Berrie and Company, Inc. Deferred Compensation
Plan. (9)
10.74 License Agreement, dated April 23, 1986, between Lever
Brothers Company and Russ Berrie and Company, Inc.
(9)
10.76(a) Lease agreement, dated September 17, 1987, between
Forsgate Industrial Complex and Russ Berrie and
Company, Inc. (11)
(b) Amendment, dated March 18, 1988, between Forsgate
Industrial Complex and Russ Berrie and Company,
Inc. (11)
10.77 Lease agreement, dated July 1, 1987, between Hunter
Street, Inc. and Russ Berrie and Co. (West), Inc.
(11)
10.78 Lease agreement, dated October 1, 1987, between David
Benjamin and Nicole Berrie Lakeland Trust and Russ
Berrie and Company, Inc. (11)
- ---------
(9) Incorporated by reference to Amendment No. 1 to Registration
Statement No. 33-10077 of Form S-1, as filed on December 16, 1986.
(11) Incorporated by reference to Annual Report on Form 10-K for the
year ended December 31, 1987.
40
(40)
10.80 Russ Berrie and Company, Inc. 1989 Stock Option Plan.
(14)
10.81 Russ Berrie and Company, Inc. 1989 Stock Option Plan for
Outside Directors. (15)
10.82 Russ Berrie and Company, Inc. 1989 Stock Option and
Restricted Stock Plan. (16)
10.83 Lease Agreement dated November 7, 1988 between A.
Mantella & Sons Limited and Amram's Distributing,
Ltd. (17)
10.84 Lease Agreement dated November 7, 1988 between Russell
Berrie and Russ Berrie and Company, Inc. (17)
10.86 Lease Agreement dated June 8, 1989 between Americana
Development, Inc. and Russ Berrie and Company,
Inc. (18)
10.87 Lease dated December 25, 1989 between Kestrel Properties,
Ltd. and Russ Berrie (U.K.) Ltd. (18)
10.89 Amendment dated January 9, 1989 to Letter of Credit and
Reimbursement Agreement dated as of December 1,
1983 between Russ Berrie and Company, Inc. and
Citibank, N.A. (18)
10.91(a) Assignment of Underlease of Unit 10 Nursling Industrial
Estate, Marks and Spencer plc to Russ Berrie
(U.K.) Limited. (19)
(b) Underlease of Unit 10 Nursling Estate County of Hants.
(19)
10.92 Agreement for sale and purchase of parts or shares of Sea
View Estate between Sino Rank Company Limited and
Tri Russ International (Hong Kong) Limited dated
March 10, 1990. (19)
--------
(14) Incorporated by reference to Form S-8 Registration Statement
No. 33-27406, as filed on March 16, 1989.
(15) Incorporated by reference to Form S-8 Registration Statement
No. 33-27897, as filed on April 5, 1989.
(16) Incorporated by reference to Form S-8 Registration Statement
No. 33-27898, as filed on April 5, 1989.
(17) Incorporated by reference to Annual Report on Form 10-K for
the year ended December 31, 1988.
(18) Incorporated by reference to Annual Report on Form 10-K for
the year ended December 31, 1989.
(19) Incorporated by reference to Annual Report on Form 10-K for
the year ended December 31, 1990.
41
(41)
10.95(a) Asset Purchase Agreement dated September 18, 1990 by and
among Bright, Inc., Bright of America, Inc.,
Bright Crest, LTD. and William T. Bright. (19)
(b) Non-Compete Agreement dated September 18, 1990 by and
between William T. Bright and Bright, Inc. (19)
(c) Deed of Trust dated September 18, 1990 by and among
Bright, Inc. F.T. Graff Jr. and Louis S.
Southworth, III Trustees, and Bright of America,
Inc. (19)
(d) Guaranty Agreement dated September 18, 1990 executed by
Russ Berrie and Company, Inc. delivered to
Bright of America, Inc. and Bright Crest, LTD.
(19)
(e) Guaranty Agreement dated September 18, 1990 executed by
Russ Berrie and Company, Inc. delivered to William
T. Bright. (19)
10.97 Russ Berrie and Company, Inc. Retirement Plan Amended
and Restated Effective January 1, 1989. (19)
----------
(19) Incorporated by reference to Annual Report on Form 10-K for
the year ended December 31, 1990.
42
(42)
10.100 Letter dated February 4, 1991 to call Development
Authority of Cobb County Industrial Development
Revenue Bond (Russ Berrie and Company, Inc.
Project), Series 1980, dated August 8, 1980. (20)
10.101(a) Sale and Purchase Agreement dated October 16, 1991 by and
among Weaver Corp. and Papel/Freelance, Inc. (20)
(b) Non-competition Agreement made October 16, 1991 by and
among Weaver Corp., an Indiana corporation,
Steven Weaver and Papel/Freelance, Inc. a
Pennsylvania corporation. (20)
10.102 Transfer of Freehold land between British
Telecommunications plc and BT Property Limited
and Russ Berrie (UK) Ltd. (21)
10.103 Executive Employment Agreement dated December, 1992
between Russ Berrie and Company, Inc. and Bernard
Tenenbaum. (21)
10.104 Russ Berrie and Company, Inc. 1994 Stock Option Plan.
(21)
10.105 Russ Berrie and Company, Inc. 1994 Stock Option Plan
for Outside Directors. (21)
10.106 Russ Berrie and Company, Inc. 1994 Stock Option and
Restricted Stock Plan. (21)
10.107 Russ Berrie and Company, Inc. 1994 Employee Stock
Purchase Plan. (21)
10.108 Asset Purchase Agreement dated October 1, 1993 by and
between RBTACQ, Inc. and Cap Toys, Inc. (22)
21.1 List of Subsidiaries
23.1 Report of Independent Accountants
23.2 Consent of Independent Accountants
- ---------------------
(20) Incorporated by reference to Annual Report on Form 10-K for the year
ended December 31, 1991.
(21) Incorporated by reference to Annual Report on Form 10-K for the year
ended December 31, 1992.
(22) Incorporated by reference to Quarterly Report on Form 10-Q for the
quarter ended September 30, 1993.
(B) REPORTS ON FORM 8-K
No reports on From 8-K were filed by the Company during the
quarter ended December 31, 1993.
43
(43)
Undertaking
In order to comply with amendments to the rules governing the use of
Form S-8 under the Securities Act of 1933, as amended, as set forth in
Securities Act Release No. 33-6867, the undersigned Registrant hereby
undertakes as follows, which undertaking shall be incorporated by reference
into Registrant's Registration Statements on Forms S-8 (File Nos. 2-96238,
2-96239, 2-96240, 33-10779, 33-26161, 33-27406, 33-27897 and 33-27898):
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
44
(44)
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.
Russ Berrie and Company, Inc.
(Registrant)
By s/Paul Cargotch
-------------------------------
Paul Cargotch
Vice President - Finance and
Chief Financial Officer
March 23, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signatures Date
---------- ----
s/Russell Berrie March 28, 1994
- --------------------------------------------
Russell Berrie, Chairman of the Board,
Chief Executive Officer, and Director
(Principal Executive Officer)
s/A. Curts Cooke March 23, 1994
- --------------------------------------------
A. Curts Cooke, President, Chief
Operating Officer and Director
(Principal Operating Officer)
s/Paul Cargotch March 23, 1994
- --------------------------------------------
Paul Cargotch, Vice President - Finance
and Chief Financial Officer
(Principal Financial and Accounting Officer)
45
(45)
s/Raphael Benaroya March 24, 1994
- ------------------------------------------
Raphael Benaroya, Director
s/Arthur D. Charpentier March 24, 1994
- ------------------------------------------
Arthur D. Charpentier, Director
s/Jimmy Hsu March 23, 1994
- -------------------------------------------
Jimmy Hsu, Director
s/Charles Klatskin March 24, 1994
- ------------------------------------------
Charles Klatskin, Director
March , 1994
- ------------------------------------------
Joseph Kling, Director
s/Sidney Slauson March 26, 1994
- ------------------------------------------
Sidney Slauson, Director
s/Bernard Tenenbaum March 23, 1994
- ------------------------------------------
Bernard Tenenbaum, Director
46
S-1
RUSS BERRIE AND COMPANY, INC. AND SUBSIDIARIES
SCHEDULE I - MARKETABLE SECURITIES - OTHER INVESTMENTS
DECEMBER 31, 1993
COL. A COL. B COL. C COL. D COL. E
------ ------ ------ ------ ------
AMOUNT AT
WHICH EACH
PORTFOLIO
OF EQUITY
SECURITY
ISSUES & EACH
NUMBER OF SHARES MARKET VALUE OTHER SECURITY
NAME OF OR UNITS OF EACH ISSUE ISSUE CARRIED
ISSUE & TITLE PRINCIPAL AMOUNT COST OF AT BALANCE IN THE
OF EACH ISSUE OF BONDS & NOTES EACH ISSUE SHEET DATE BALANCE SHEET
------------- ---------------- ---------- ---------- -------------
United States Treasury
& its agencies' obligations 7,000,000 $7,043,135 $7,138,710 $7,138,710
Angelina & Neches Riv Auth
Solid Waste Disp Rev Temple
East PJ 900,000 900,000 900,715 900,715
NYS G.O. Bans Ser N TECP 1,000,000 1,000,000 1,003,082 1,003,082
NYS G.O. Bans Ser N TECP 1,000,000 1,000,000 1,004,122 1,004,122
Societe Generale NY YCD 1,000,000 998,523 1,020,656 1,020,656
Texas Municipal Pwr BMS 1,000,000 1,000,000 1,000,000 1,000,000
Harris Co TX Health Fac
Dev Corp Ser 92A St Luke
Episcopal Hosp 1,000,000 1,000,000 1,001,067 1,001,067
North Texas Higher ED Auth
Inc Student Loan VRDN-Weekly 1,000,000 1,000,000 1,002,008 1,002,008
Wake Co N.C. PCR Fltr
Carolina Power & Light 700,000 700,000 701,385 701,385
State of Wisconsin G.O. 1,000,000 1,012,610 1,020,833 1,020,833
State of Conn G.O. 1,000,000 1,018,560 1,015,783 1,015,783
GMAC 1992 D Grantor TR 213,019 212,870 216,102 216,102
Contra Costa Wtr Rev, CA 500,000 519,940 520,255 520,255
GMAC 1992 F Grantor TR 276,285 275,854 277,916 277,916
FORD Credit 1993 A
Grantor Trust CTF 674,750 674,429 681,131 681,131
Volvo Auto Rec Grantor Trust 602,155 601,873 606,290 606,290
NY Local Govt Corp NY 500,000 498,800 510,330 510,330
Hamilton Township, NJ 500,000 522,955 529,023 529,023
Maryland Dept Trans 1,000,000 1,066,650 1,067,033 1,067,033
Missouri St Environ Impt
Energy Res AT NTS RV FD-A 500,000 505,445 503,075 503,075
Minneapolis, Minnesota Spl
School District No. 1 500,000 500,000 512,740 512,740
Kentucky State Property & Bldgs
Commn Revs RFDG Proj #54 500,000 500,000 508,452 508,452
Wisconsin St Transn Rev Ser B 500,000 500,000 511,690 511,690
Overland Park KS Ser A RFDG 500,000 503,920 508,703 508,703
Washington St Ser B & AT - 7 1,000,000 1,010,790 1,026,284 1,026,284
Maricopa Cnty AZ RFDG 1,000,000 1,037,920 1,065,365 1,065,365
Texas ST Pub Fin Auth RV
Equip Ser A RFDG 1,000,000 1,002,530 1,009,500 1,009,500
San Antonio, Texas tax
& revenue obligations 1,000,000 1,000,000 1,016,793 1,016,793
Arizona ST CTFS Partn Ser A 1,000,000 1,000,000 1,001,460 1,001,460
Las Vegas Valley, Nevada
Water Dist RFDG 1,000,000 1,026,680 1,030,433 1,030,433
Dade County, Florida Water
System Revenue RFDG 500,000 499,545 504,063 504,063
Pennsylvania State Turnpike
Revenue Series O 1,000,000 1,000,000 1,005,503 1,005,503
---------- ----------- ----------- -----------
TOTALS - 30,866,209 $31,133,029 $31,420,502 $31,420,502
========== =========== =========== ===========
47
S-2
RUSS BERRIE AND COMPANY, INC. AND SUBSIDIARIES
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- -------- -------- -------- --------
BALANCE AT BALANCE
BEGINNING CHARGED TO AT END
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS* OF PERIOD
- ----------- --------- ---------- ----------- ---------
Allowance for doubtful
trade accounts receivable:
Year ended December 31, 1991 $3,595,000 $3,413,000 $3,540,000 $3,468,000
Year ended December 31, 1992 3,468,000 4,859,000 3,098,000 5,229,000
Year ended December 31, 1993 5,229,000 2,198,000 3,597,000 3,830,000
Allowance for slow moving
inventory items:
Year ended December 31, 1991 $7,029,000 $1,636,000 $1,632,000 $7,033,000
Year ended December 31, 1992 7,033,000 6,470,000 1,853,000 11,650,000
Year ended December 31, 1993 11,650,000 7,451,000 3,323,000 15,778,000
*Principally account write-offs and disposal of merchandise, respectively.
48
Exhibit Index
Exhibit Numbers
- ---------------
21.1 List of Subsidiaries
23.1 Report of Independent Accountants
23.2 Consent of Independent Accountants