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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, 1995 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
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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 Identification Number)
incorporation or organization)
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 13, 1996 was $155,704,512.
The number of shares outstanding of each of the Registrant's classes of common
stock, as of March 13, 1996, was as follows:
Class Number of Shares
------------------- ----------------
Common Stock, $0.10 stated value 21,609,830
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the Registrant's Proxy Statement dated March 15, 1996,
relating to registrant's Annual Meeting of Shareholders to be held on April 24,
1996 (the "1996 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. The term
"Company" refers to Russ Berrie and Company, Inc. and its consolidated
subsidiaries, unless the context requires otherwise. Its principal executive
offices are located at 111 Bauer Drive, Oakland, New Jersey 07436, and its
telephone number is (201) 337-9000.
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 gift and toy items.
The Company's gift products are designed to appeal to the emotions of consumers
to reflect their feelings of friendship, fun, love and affection. The Company
believes that its present position as one of the leaders in the 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.
The Company's toy subsidiaries, Cap Toys, Inc., and OddzOn Products, Inc.,
market toys, novelty candy and sports related products to mass merchandisers,
sporting goods and specialty toy stores. Products of these companies are
marketed primarily through independent representative groups and international
distributors.
Financial information related to business segments and geographic areas are
presented in Note 14 in the Notes to Consolidated Financial Statements.
PRODUCTS
The Company's gift product line of more than 7,000 items (including distinctive
variations on basic product designs) are marketed under the trade name and
trade mark RUSS(R). This extensive line encompasses both seasonal and everyday
products that focus on theme or concept groupings such as Teddy Bears, Baby
Products, Home Decor, Lifestyles and Collectibles. Individual products include
stuffed animals, picture frames, mugs, porcelain gifts, figurines, candles and
kitchen magnets.
The Company's toy line includes a variety of innovative toys, novelty candies,
and sports related products. Cap Toys, Inc's. products include items such as
Stretch Armstrong(R), Vac-Man(R), Bundles of Babies(TM), Pog Maker(TM), and
Shout 'N' Shoot(TM). OddzOn Products, Inc., whose products are marketed
primarily under the brand name Koosh(R), include products such as the Koosh(R)
Ball, Woosh(R), Vortex(R), Koosh(R) Accessories, Koosh(R) Soft Sport(TM) and
Koosh(R) Collectibles (including (C)Disney and Warner Bros.(C) licensed
characters).
The Company's Bright of America, Inc. subsidiary markets gift products directly
to mass merchandisers. In addition, the Company's subsidiary Fluf N' Stuf,
Inc. operates a chain of outlet stores under the name "RUSS" which sell the
Company's products and products of unaffiliated companies.
Most of the Company's gift products have suggested retail prices between $1 and
$30. The Company's toy products generally retail for between $3 and $25.
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During 1995, the Company decided to concentrate its efforts and resources
within the gift business on building the RUSS business. As a result, the
decision was made to sell the Company's Papel/Freelance, Inc. subsidiary, which
also served the gift industry by principally offering a wide variety of ceramic
products. On January 17, 1996, the Company completed the sale of the business
of its subsidiary, Papel/Freelance, Inc. During the years ended December 31,
1995, 1994 and 1993, sales of Papel/Freelance as a percentage of the Company's
total sales represented 8.8%, 11.9% and 13.7%, respectively (See Note 17 of the
notes to Consolidated Financial Statements).
The percentages of dollar sales accounted for by business segments during the
periods indicated are as follows:
FOR THE YEARS ENDED DECEMBER 31,
1995 1994 1993
---- ---- ----
GIFT 61% 67% 95%
TOYS* 39% 33% 5%
* Includes Cap Toys, Inc., since its acquisition in October 1993, and OddzOn
Products, Inc., since its acquisition in October 1994.
Product sales within the Company's gift business is highly diverse and as such,
no single gift item represented more than 1% of sales within the gift segment
in 1995. While the Company's toy business is less diverse than that of the
gift segment, no one individual item represented more than 8% of sales within
the toy segment.
DESIGN AND PRODUCTION
The Company's gift business has a continuing program of new product
development. The Company designs most of its own products and then generally
evaluates consumer response through test marketing in selected unaffiliated
retail stores. 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.
The Company believes that the breadth of its gift product line and the
continuous development of new products are key elements to its success and that
it is capable of designing and producing large numbers of new products
annually.
The Company has more than 170 employees responsible for gift product
development and design located 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 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.
The Company engages in market research and test marketing to evaluate consumer
reactions to its gift products. Research into consumer buying trends often
suggests new products. The Company assembles information from retail stores,
the Company's salesforce and the Company's own Product Development 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 gift product line.
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The Company's toy subsidiaries develop products in conjunction with independent
toy inventors. The products are evaluated by the Design and Development staff
and undergo a testing process to determine the reaction and acceptability in
the marketplace. Products are then selected based on manufacturing and
marketing profitability criteria and reaction from its major customers.
Many popular toy products result in product line extensions, enabling the
Company to increase its product line and expand on the marketing success of
popular products.
Substantially all of the Company's products are produced by independent
manufacturers, generally in the Far East, under supervision by Company
personnel. During 1995, approximately 95% of the Company's gift products were
produced in the Far East, and 5% in the United States. During 1995,
approximately 76% of the Company's toy products were purchased from sources
outside the United States, primarily in the Far East, and 24% in the United
States. The dollar amount of purchases in the United States predominantly
represent domestically produced raw materials, component parts, packaging,
displays and labor costs associated with items requiring final assembly in the
United States.
The Company utilizes approximately 270 manufacturers in the Far East, primarily
in the People's Republic of China, Taiwan, Korea, and Indonesia. During 1995,
approximately 79% of the Company's dollar volume of purchases was 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 significant portion of the Company's staff of approximately 350 employees in
Hong Kong, Taiwan, Korea and Indonesia monitor the production process with
responsibility for 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. Many 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 one manufacturer will not significantly
affect the operations of the Company. In 1995, the supplier accounting for the
greatest dollar volume of the Company's purchases accounted for approximately
5% of such purchases and the five largest suppliers accounted for approximately
22% in the aggregate.
MARKETING
The Company's gift products are marketed primarily through its own direct
salesforce of more than 450 full-time employees. Products are sold directly to
retail stores in the United States and in certain foreign countries, including
gift stores, pharmacies, card shops, home decor shops, apparel stores, craft
stores, garden stores, book stores, stationery stores, hospitals, college and
airport gift shops, resort and hotel shops, florists, chain stores and military
post exchanges. During 1995, the Company sold gift products to more than
50,000 customers. No single gift customer accounted for more than 1.7% of gift
dollar sales.
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The Company reinforces the marketing efforts of its gift product salesforce
through an active promotional program, including showrooms, participation in
trade shows, trade advertising and a program of seasonal and theme based
catalogs.
The Company believes that effective packaging and merchandising of its gift
products are very important to its marketing success. Many gift 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 wooden
displays, 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 gift
industry. The Company provides extended payment terms to gift customers on
sales of seasonal merchandise, e.g., Christmas, Halloween, Easter and other
seasons. Within the gift business, the Company has a general policy of not
accepting returns or selling on consignment.
The Company's toy business sells its products primarily through independent
representative groups to mass merchandisers, which represent a significant
portion of its sales. During 1995, approximately 23% of the toy business sales
were sold to its largest customer and 56% to its five largest customers.
The Company supports certain of its toy products through an extensive
advertising campaign. Advertising expense related to the Company's toy
business for the years ended December 31, 1995, 1994 and 1993 was $15,218,000,
$10,650,000 and $1,883,000, respectively. The majority of its advertising
budget is allocated to television advertising.
The Company's toy business generally does not sell its products on consignment
and ordinarily accepts returns only for defective merchandise. In certain
instances, the Company may, in accordance with industry practice, assist
retailers in order to enable them to sell excess inventory by offering
discounts and other concessions.
The Company maintains a direct salesforce and distribution network to serve its
gift customers in Great Britain, Holland, Belgium, Ireland and Canada. The
Company's gift products are sold worldwide, through distributors, where the
Company does not maintain a direct salesforce and distribution network.
Additionally, sales of toy products are sold through distributors in Great
Britain, Canada and many other foreign countries. The Company's foreign sales,
including export sales from the United States, aggregated $78,208,000,
$62,342,000 and $68,295,000 for the years ended December 31, 1995, 1994 and
1993, respectively.
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DISTRIBUTION
The Company has customers located in the United States and throughout the
world. In order to serve them quickly and effectively, the Company maintains
U.S. distribution centers for its gift business in South Brunswick, New Jersey,
Columbus, Ohio, and Petaluma, California which receive products directly from
suppliers (in the case of Columbus, Ohio, receives product from South
Brunswick, New Jersey), and then distribute such products to the Company's
customers. The Company also maintains a facility in the Toronto, Canada area
for its Canadian customers and facilities in Southampton, England to serve its
customers in Europe. The Company generally uses common carriers to distribute
to its customers.
The Company's toy product line is distributed through Cap Toys, Inc., which
maintains an office and warehouse distribution facility in Bedford Heights,
Ohio and through OddzOn Products, Inc., which maintains an office in Campbell,
California and distributes its products from the Company's facility in
Petaluma, California.
SEASONALITY
In addition to its everyday gift products, the Company produces specially
designed products for holiday seasons which include: Christmas, Valentine's
Day, Easter, Halloween, Mother's Day, Thanksgiving, Graduation, Father's Day,
and St. Patrick's Day.
The pattern of the Company's gift sales is influenced by the shipment of
seasonal merchandise. The Company generally ships the majority of gift 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.
During 1995, gift items specially designed for individual seasons accounted for
approximately 42% of the Company's gift sales; no individual season accounted
for more than 15% of the Company's gift sales.
The toy industry is highly seasonal in nature due to the demand for toy
products during the Christmas season. To reduce the impact of this
seasonality, the Company's toy business markets items specially designed for
the summer season. Such items include Shout 'N' Shoot(TM), Vortex(R), Koosh(R)
Paddle Ball, and other sports related products. The Company's toy business
also markets an imaginative line of novelty candy products which are sold
throughout the year.
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The following table sets forth the Company's quarterly sales by business
segment during 1995, 1994 and 1993.
QUARTERLY SALES
(in millions)
1995 1994 1993
------------------ ----------------- ----------------
QUARTER ENDED SALES % SALES % SALES %
- ------------- ------ ----- ----- ----- ----- -----
MARCH 31
Gift $ 56.2 $50.9 $96.3
Toys* 23.9 13.3 -
---- ----- -----
Consolidated $ 80.1 23.0 $64.2 23.1 $96.3 34.5
JUNE 30
Gift $ 40.7 $36.1 $49.9
Toys* 33.6 21.4 -
---- ----- -----
Consolidated $ 74.3 21.3 $57.5 20.7 $49.9 17.9
SEPTEMBER 30
Gift $ 67.0 $56.6 $70.7
Toys* 37.0 26.3 -
---- ----- -----
Consolidated $104.0 29.8 $82.9 29.8 $70.7 25.3
DECEMBER 31
Gift $ 50.0 $43.8 $49.5
Toys* 40.1 29.7 12.7
---- ----- -----
Consolidated $ 90.1 25.9 $73.5 26.4 $62.2 22.3
* Includes Cap Toys, Inc., since its acquisition in October 1993, and OddzOn
Products, Inc., since its acquisition in October 1994.
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. Net sales of the Company were favorably impacted by the success
of products associated with the Troll product line in the first quarter of
1993.
BACKLOG
It is characteristic of the Company's gift business that orders for seasonal
merchandise are taken in advance of shipment. In the toy industry,
historically, new toy products have been introduced to the trade at the annual
industry trade shows during the quarter ended March 31 and, as such, the order
backlog at the end of any fiscal year may not be a meaningful predictor of
financial results of the succeeding year. The Company's total backlog at
December 31, 1995 and December 31, 1994 was $29,679,000 and $27,146,000,
respectively (excludes Papel/Freelance for 1995 and 1994).
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COMPETITION
The gift and toy industries are highly competitive. The Company believes that
the principal competitive factors in the gift and toy business are marketing
ability, reliable delivery, product design, quality, customer service and
price. The Company's principal gift competitors are Gund, Inc., Midwest
Imports, Department 56, Inc., Boyds Collections LTD. (Inc.) Ganz Bros., Ty,
Inc., Applause, Inc., Enesco and numerous small suppliers. The Company's
principal toy competitors are Lewis Galoob Toys, Inc., Toy Biz Inc., Tyco Toys,
Inc., Mattel, Inc. and Hasbro Inc. 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. The Company has registered, in the United States and certain
foreign countries, the trademark RUSS(R) with a distinctive design, which is
utilized on most of its gift 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 enters into various license agreements relating to trademarks,
copyrights, designs and products which enable the Company to market items
compatible with its product line. The Company has license agreements with the
National Football League, (C)Disney and Warner Bros.(C), among others. The
Company's licenses are generally exclusive for specific products in specified
territories. Royalties are paid on licensed items and, in many cases, advance
royalties and minimum guarantees are required by these license agreements.
The majority of the Company's toy products are developed in conjunction with
independent toy designers. Rights to such products are generally exclusive and
require the payment of a royalty.
EMPLOYEES
As of December 31, 1995, the Company employed approximately 2,000 persons. 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 confidentiality agreements and, in
the case of management and sales personnel, non-competition agreements (subject
to certain territorial limitations in the case of salespersons) which restrict
their ability to complete with the Company for a period of six months after
termination of their employment.
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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 regulating their use or
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 certain foreign jurisdictions. The Company maintains a quality
control program in order to comply with applicable laws.
ITEM 2. PROPERTIES
The Company's principal facilities consist of its corporate offices in Oakland,
New Jersey, and 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's toy subsidiary, Cap Toys, Inc., maintains an office and warehouse
distribution facility in Bedford Heights, Ohio and OddzOn Products, Inc.,
maintains an office in Campbell, California and distributes its products from
the Company's Petaluma, California facility. 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 are generally fully utilized, other than those that were
closed as part of a restructuring of the Company's distribution system.
THE COMPANY'S CURRENT PRINCIPAL FACILITIES ARE AS FOLLOWS:
Lease Expiration
Location - Domestic Sq. Ft. Area (if applicable) (1)
-------------------- ------------ ---------------------
Petaluma, California (2)(3)(6)...... 234,200 June 30, 2004
Oakland, New Jersey (2)(4).......... 120,000 April 1, 2004
South Brunswick, New Jersey (2)(3).. 513,680 May 31, 1999
Reynoldsburg, Ohio (3).............. 77,600 July 1, 1997
Collegeville, Pennsylvania (5)...... 5,100 December 31, 1998
Summersville, West Virginia (5)(6).. 156,000 Not Applicable-
Owned by Company
Bedford Hts., Ohio (5)(6)........... 120,492 January 31, 2000
Campbell, California (5)............ 8,248 Month to Month
Lease Expiration
Location - Foreign Sq. Ft. Area (if applicable)(1)
------------------- ------------ ---------------------
Chandlers Ford, England (5)......... 10,846 December 24, 2014
Southampton, England (6)............ 60,750 March 24, 2003
Southampton, England (6)............ 51,000 Not applicable -
Owned by Company
Rexdale, Ontario, Canada (5)(6)..... 76,290 May 31, 1997
Hong Kong (5)....................... 25,600 Not applicable -
Owned by Company
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(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) Subsidiary (or division) headquarters.
(6) Subsidiary (or division) distribution center.
The Company's Dayton, New Jersey, Lakeland, Florida and one of its Rexdale,
Ontario, Canada facilities were closed as part of restructuring of the
Company's distribution system. These facilities have been partially subleased
and have remaining lease terms from one to three years. (See Note 7 of the
Notes to Consolidated Financial Statements).
The Company leases an aggregate of approximately 25,764 square feet of showroom
facilities in New York City; Los Angeles and San Francisco, California;
Atlanta, Georgia; Chicago, Illinois; Dallas, Texas; Montreal and Vancouver,
Canada; Brussels, Belgium; and Utrecht, Holland. The remaining lease terms at
these facilities range between one and nine years.
Fluf N' Stuf, Inc. leases retail store space in shopping and outlet malls
located within the United States. The aggregate square footage of these 23
stores is approximately 47,654 square feet. The remaining lease terms,
excluding options to renew, at these facilities range between three and six
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.
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 15 of the Notes to Consolidated Financial
Statements).
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS
Not applicable.
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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 ................... 63 Chairman of the Board, Chief Executive Officer and Director
Arnold S. Bloom................ 53 Vice President, Secretary and General Counsel
Paul Cargotch.................... 51 Vice President - Finance and Chief Financial Officer
Ricky Chan........................ 43 Senior Vice President - Product Development
A. Curts Cooke................ 59 President, Chief Operating Officer and Director
Jimmy Hsu......................... 46 Vice Chairman of the Board and Director
Y.B. Lee............................ 50 Vice President - Far East Plush Division
Eric R. Lohwasser........... 40 Vice President - Controller
Guy M. Lombardo.......... 51 Vice President - Management Information Systems
Bernard H. Tenenbaum....... 41 Vice President - Corporate Development and Director
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.
Arnold S. Bloom has been employed by the Company as Vice President, Secretary
and General Counsel for more than the past five years.
Paul Cargotch has been employed by the Company as Vice President - Finance and
Chief Financial Officer for more than the past five years.
Ricky Chan has been employed by the Company as Senior Vice President - Product
Development since July 25, 1995. Prior to that, Mr. Chan was Vice President -
Creative Division since January 1991.
A. Curts Cooke has been employed as President and Chief Operating Officer of
the Company for more than the past five years. Mr. Cooke has served as a
Director of the Company since 1982.
Jimmy Hsu has been employed by the Company as Vice Chairman of the Board since
July 1995. Prior to that, Mr. Hsu's titles were Executive Vice President of
the Company since July 1, 1994 through June 1995, Senior Vice President -
Product Development and Far East Operations from August 1991 through June 1994
and Senior Vice President - Far East Operations from January 1987 through July
1991. Mr. Hsu has served as a Director of the Company since 1988.
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Y.B. Lee has been employed by the Company as Vice President - Far East Plush
Division for more than the past five years.
Eric R. Lohwasser has been employed by the Company as Vice President -
Controller since December 1995. Prior thereto Mr. Lohwasser was Corporate
Controller for more than the past five years.
Guy M. Lombardo has been employed by the Company as Vice President - Management
Information Systems for more than the past five years.
Bernard H. Tenenbaum has been employed by the Company as Vice President -
Corporate Development since January 14, 1993. 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 Dickinson
University, and was previously Associate Director of the Snider Entrepreneurial
Center of the Wharton School. Mr. Tenenbaum has served as a Director of the
Company since 1989.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
At December 31, 1995, the Company's Common Stock was held by approximately 700
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 New York Stock Exchange:
1995 HIGH LOW
- ---- ---------- ---------
First Quarter..................... $ 14 5/8 $ 12
Second Quarter.................... 15 12 1/8
Third Quarter..................... 15 7/8 13 1/4
Fourth Quarter.................... 14 1/4 12 1/4
1994
- ----
First Quarter..................... $15 3/8 $ 13 1/8
Second Quarter.................... 15 5/8 12 3/4
Third Quarter..................... 15 1/2 13 5/8
Fourth Quarter.................... 15 13
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)
1995 1994 1993 1992 1991 1990
------ -------- -------- -------- -------- --------
SUMMARY OF OPERATIONS
Net Sales $348,474 $278,105 $279,111 $444,382 $267,859 250,579
Cost of Sales 174,609 143,867 125,923 176,265 109,857 105,443
Income Before
Income Taxes * 25,573 7,024 17,573 92,999 31,746 23,239
Provision for
Income Taxes 9,033 1,697 4,391 32,651 9,704 5,817
Net Income 16,540 5,327 13,182 60,348 22,042 17,422
Net Income Per Share .77 .25 .61 2.70 .98 .77
Dividends Per Share** .60 .60 .60 .47 .40 .70
BALANCE SHEET
Working Capital $158,462 $152,454 $178,001 $206,510 $166,538 $154,841
Property, Plant and
Equipment 24,797 25,298 28,133 29,577 27,035 34,010
Total Assets 265,163 254,826 259,115 298,847 226,319 216,459
Long-Term Debt - - - - 3,000 4,492
Shareholders' Equity 222,996 218,388 224,034 241,259 196,278 188,380
STATISTICAL
Effective Income
Tax Rate 35.3% 24.2% 25.0% 35.1% 30.6% 25.0%
Current Ratio 4.8 5.2 6.1 4.6 7.2 7.6
Return on Average
Shareholders' Equity 7.5% 2.4% 5.7% 27.6% 11.5% 9.3%
Net Profit Margin 4.7% 1.9% 4.7% 13.6% 8.2% 7.0%
Number of Employees 1,961 1,919 2,126 2,608 2,333 2,569
* Includes a restructuring charge of $5.0 million in 1993.
** Includes a special dividend of $.40 per share in 1990.
13
14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS - YEARS ENDED DECEMBER 31, 1995 AND 1994
For the year ended December 31, 1995 the Company's net sales of $348,474,000
compares to net sales for the year ended December 31, 1994 of $278,105,000.
This represents an increase of 25.3%. Included in the results for the year
ended December 31, 1995 are the net sales of $39,671,000 achieved by OddzOn
Products, Inc., compared to net sales of $8,315,000 included in the year ended
December 31, 1994. The year ended December 31, 1994 includes the results of
OddzOn Products, Inc. since its acquisition in October 1994. Net sales of the
Company's toy business, which includes Cap Toys, Inc. and OddzOn Products,
Inc., was $134,556,000 for the year ended December 31, 1995 compared to
$90,717,000 for the year ended December 31, 1994. Excluding the net sales of
the Company's toy business, consolidated net sales for the year ended December
31, 1995 were $213,918,000 compared to $187,388,000 for the year ended December
31, 1994, an increase of $26,530,000 or 14.2%.
Cost of sales were 50.1% of net sales in 1995 compared to 51.7% of net sales in
1994. This decrease can be attributed to the components of cost of sales that
are fixed costs which were absorbed by the higher sales volume in the year
ended December 31, 1995.
Selling, general and administrative expense was $150,097,000 or 43.1% of net
sales for the year ended December 31, 1995 compared to $129,645,000 or 46.6% of
net sales in 1994, an increase of $20,452,000 or 15.8%. The increase in
selling, general and administrative expense can be primarily attributed to the
increase in selling, general and administrative expense of OddzOn Products,
Inc. (approximately $12,300,000). The year ended December 31, 1994 includes
the results of OddzOn Products, Inc. since its acquisition in October 1994.
Also contributing to the increase in selling, general and administrative
expense is the increase in expenses at Cap Toys, Inc. (approximately
$6,600,000, primarily advertising expense) required to support the higher sales
level.
Investment and other income of $1,805,000 for the year ended December 31, 1995
compares to $2,431,000 in 1994. This decrease can be attributed to decreased
investment income relative to the Company's short term investment portfolio
resulting from lower investment balances and to foreign currency exchange gains
and losses related to intercompany loan transactions.
The provision for income taxes as a percent of income before taxes for the year
ended December 31, 1995 was 35.3% compared to 24.2% in the prior year. This
increase can be attributed to the U.S. Federal tax liability on certain
foreign subsidiary income during the year ended December 31, 1995, which was
not subject to U.S. Federal tax in the prior year.
Net income for the year ended December 31, 1995 of $16,540,000 compares to net
income of $5,327,000 in 1994. This increase in net income can be attributed to
the increase in net sales, partially offset by the increase in selling, general
and administrative expense and the increase in the effective tax rate.
14
15
RESULTS OF OPERATIONS - YEARS ENDED DECEMBER 31, 1994 AND 1993
For the year ended December 31, 1994 the Company's net sales of $278,105,000
compares to net sales for the year ended December 31, 1993 of $279,111,000.
Included in the results for the year ended December 31, 1994 are the net sales
of $82,402,000 achieved by Cap Toys, Inc., which was acquired in October 1993,
compared to net sales of Cap Toys, Inc. of $12,653,000 included in the year
ended December 31, 1993. Also included in the results for the year ended
December 31, 1994 are net sales of $8,315,000 of OddzOn Products, Inc. which
was acquired in October 1994. Excluding the net sales of Cap Toys, Inc. and
OddzOn Products, Inc., consolidated net sales for the year ended December 31,
1994 decreased $79,070,000 compared to the year ended December 31, 1993. This
decrease can be attributed to the significant decrease in the sales of Troll
products compared to the prior year. During the year ended December 31, 1994
net sales of Troll products were approximately $7,300,000 compared to
approximately $86,700,000 for the year ended December 31, 1993.
Cost of sales were 51.7% of net sales in 1994 compared to 45.1% of net sales in
1993. This increase can be attributed primarily to the higher gross profit
margins on sales of Troll products which represented a larger portion of net
sales during 1993 and the effects of the reduction of the selling price of
certain of the Company's products in August 1993. Also contributing to the
increase in cost of sales are the lower gross profit margins achieved by Cap
Toys, Inc. compared to certain of the Company's other sales and distribution
channels.
Selling, general and administrative expense was $129,645,000 or 46.6% of net
sales for the year ended December 31, 1994 compared to $133,188,000 or 47.7% of
net sales in 1993, a decrease of $3,543,000 or 2.7%. Excluding the increase in
selling, general and administrative expense of Cap Toys, Inc. (approximately
$20,400,000) and the inclusion of the selling, general and administrative
expense of OddzOn Products, Inc. (approximately $3,100,000), selling, general
and administrative expense decreased $27,043,000. This decrease can be
attributed to a decrease in expenses required to support lower sales levels
(approximately $16,600,000), including a reduction in the number of
salespeople, and cost reductions associated with the restructuring program
implemented during 1993 of closing and consolidating distribution centers and
administrative functions (approximately $7,700,000). Cost reductions related to
this restructuring were partly realized in the year ended December 31, 1993,
resulting in total annualized savings in excess of $10,000,000. Also
contributing to the decrease in selling, general and administrative expense are
lower expenses related to the Company's "Just Say It With A Russ" consumer
advertising program (approximately $2,500,000).
Investment and other income of $2,431,000 for the year ended December 31, 1994
compares to $2,573,000 in 1993.
The provision for income taxes as a percent of income before taxes for the year
ended December 31, 1994 was 24.2% compared to 25.0% in the prior year.
Net income for the year ended December 31, 1994 of $5,327,000 compares to net
income of $13,182,000 in 1993. This decrease in net income can be attributed
to the increase in cost of sales as described above partially offset by the
decrease in selling, general and administrative expense. Included in the
results of operation for the year ended December 31, 1993 is a restructuring
charge of $5,000,000 resulting in an after tax effect on net income of
$3,150,000.
15
16
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1995, the Company had cash and cash equivalents and short-term
investments of $36,836,000 compared to $47,961,000 at December 31, 1994.
During the year ended December 31, 1995, the Company generated net cash flows
from operating activities of $8,116,000 resulting from net income of
$16,540,000, depreciation and amortization of $7,208,000 and accounts
receivable reserve provisions of $9,952,000 offset by increases in accounts
receivable of $16,357,000 and inventories of $10,655,000, as a result of the
increase in net sales. Funds of $12,921,000 were used for the payment of
dividends.
On January 17, 1996, the Company sold the assets of its subsidiary
Papel/Freelance, Inc. The sale will result in an increase in cash and cash
equivalents of approximately $19,200,000. In addition, $2,000,000 relating to a
transitional agreement will be recognized, contingent upon satisfaction of the
terms of the agreement.
The Company has available $88,099,000 in bank lines of credit that provide for
direct borrowings and letters of credit used for the purchase of inventory. At
December 31, 1995, letters of credit of $24,983,000 were outstanding. There
were no direct borrowings under the bank lines of credit. Working capital
requirements during 1995, 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.
16
17
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 sheets of Russ Berrie and
Company, Inc. and subsidiaries (the "Company") as of December 31, 1995 and
1994, and the related consolidated statements of income, shareholders' equity,
and cash flows for each of the three years in the period ended December 31,
1995. 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. and subsidiaries as of December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995 in conformity with generally
accepted accounting principles.
Parsippany, New Jersey
Coopers & Lybrand L.L.P.
February 2, 1996
17
18
CONSOLIDATED STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1995 1994 1993
------- ------ ------
Net sales .................................... $ 348,474 $278,105 $279,111
Cost of sales................................. 174,609 143,867 125,923
------- ------- -------
GROSS PROFIT............................... 173,865 134,238 153,188
Selling, general and administrative expense... 150,097 129,645 133,188
Restructuring charge.......................... - - 5,000
Investment and other income - net ............ 1,805 2,431 2,573
------ ------- -------
INCOME BEFORE INCOME TAXES.................... 25,573 7,024 17,573
Provision for income taxes.................... 9,033 1,697 4,391
------ ------- -------
NET INCOME................................. $ 16,540 $ 5,327 $ 13,182
====== ======= =======
NET INCOME PER SHARE.......................... $ .77 $ .25 $ .61
====== ======= =======
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
18
19
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, 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)
Net income....................... - - 5,327 - -
Share transactions under
stock option plans............. 7 1,035 - - -
Cash dividends ($.60 per share).. - - (12,874) - -
Foreign currency
translation adjustment......... - - - 859 -
----- ------ ------- ------- -------
BALANCE AT DECEMBER 31, 1994..... 2,395 37,875 218,103 (2,128) (37,857)
Net Income....................... - - 16,540 - -
Share transactions under
stock option plans............. 6 771 - - -
Cash dividends ($.60 per share).. - - (12,921) - -
Foreign currency
translation adjustment......... - - - 212 -
----- ------ ------- ------ ------
BALANCE AT DECEMBER 31, 1995..... $2,401 $38,646 $221,722 $(1,916) $(37,857)
===== ====== ======= ====== ======
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
19
20
CONSOLIDATED BALANCE SHEET AT DECEMBER 31,
(DOLLARS IN THOUSANDS)
ASSETS 1995 1994
- ------- ------ ------
Current assets
Cash and cash equivalents..................... $ 36,836 $ 42,758
Short-term investments........................ - 5,203
Accounts receivable, trade, less allowances;
$10,330 in 1995 and $5,651 in 1994 ........ 62,675 55,474
Inventories - net............................. 79,090 67,052
Prepaid expenses and other current assets..... 5,253 4,229
Deferred income taxes......................... 16,775 14,176
------- -------
TOTAL CURRENT ASSETS............. 200,629 188,892
Property, plant and equipment - net............. 24,797 25,298
Goodwill and other intangible assets - net...... 34,050 35,913
Other assets.................................... 5,687 4,723
------- -------
TOTAL ASSETS..................... $265,163 $254,826
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current liabilities
Accounts payable............................. $ 7,369 $ 6,972
Accrued expenses............................. 30,044 24,795
Accrued restructuring costs.................. 3,359 4,527
Accrued income taxes......................... 1,395 144
------- -------
TOTAL CURRENT LIABILITIES........ 42,167 36,438
Commitments and contingencies
Shareholders' equity
Common stock: $.10 stated value; authorized
50,000,000 shares; issued 1995, 24,011,198
shares; 1994, 23,953,530 shares............ 2,401 2,395
Additional paid in capital................... 38,646 37,875
Retained earnings............................ 221,722 218,103
Foreign currency translation adjustments..... (1,916) (2,128)
Treasury stock, at cost (2,454,813 shares)... (37,857) (37,857)
------- -------
TOTAL SHAREHOLDERS' EQUITY....... 222,996 218,388
------- -------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY............. $265,163 $254,826
======= =======
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
20
21
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31
(Dollars in Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES: 1995 1994 1993
------ ------ ------
Net income $ 16,540 $ 5,327 $13,182
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation................................ 4,177 4,549 5,172
Amortization of intangible assets........... 3,031 2,436 1,193
Provision for accounts receivable reserves.. 9,952 5,581 2,198
Gains or losses from sale or disposal
of fixed assets........................... 283 (353) (203)
Changes in assets and liabilities net of
effect of acquisitions
Accounts receivable......................... (16,357) (14,156) 34,509
Inventories................................. (10,655) 3,263 17,207
Deferred income taxes....................... (2,599) (2,007) (1,573)
Prepaid expenses and other current assets... (1,020) 942 (912)
Other Assets................................ (965) (3,139) 87
Accounts payable............................ 397 1,737 (1,620)
Accrued expenses............................ 5,249 1,174 (10,495)
Accrued restructuring costs................. (1,168) (1,755) 2,823
Accrued income taxes........................ 1,251 (249) (10,886)
------ ----- ------
Total adjustments....................... ( 8,424) (1,977) 37,500
------ ----- ------
Net cash provided by
operating activities.................. 8,116 3,350 50,682
CASH FLOWS FROM INVESTING ACTIVITIES:
Sales of short-term investments................. 5,203 26,218 (979)
Proceeds from sale of fixed assets.............. 605 1,362 1,928
Capital expenditures............................ (4,563) (2,405) (5,190)
Acquisitions.................................... (3,352) (26,272) (24,380)
----- ------ ------
Net cash provided by (used in)
investing activities.................... (2,107) (1,097) (28,621)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of long-term debt...................... - - (3,000)
Issuance of common stock........................ 777 1,042 5,503
Dividends....................................... (12,921) (12,874) (12,797)
Transactions in treasury shares................. - - (22,214)
------ ------ ------
Net cash (used in) financing
activities............................. (12,144) (11,832) (32,508)
Effect of exchange rate......................... 213 859 (360)
------ ------ ------
Net decrease in cash and
cash equivalents.............................. (5,922) (8,720) (10,807)
Cash and cash equivalents at beginning of year.. 42,758 51,478 62,285
------ ------ ------
Cash and cash equivalents at end of year........ 36,836 $42,758 $51,478
====== ====== ======
CASH PAID DURING THE YEAR FOR:
Interest.................................... $ 294 $ 353 $ 531
Income taxes................................ $10,380 $ 3,953 $16,851
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
21
22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES:
PRINCIPLES 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.
REVENUE RECOGNITION
The Company recognizes revenue from product sales, net of provisions for
allowances, upon shipment to the customer.
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.
Advertising cost for the years ended December 31, 1995, 1994 and 1993 amounted
to $17,291,000, $12,913,000 and $7,414,000, respectively.
CASH EQUIVALENTS
Cash equivalents consist of investments in interest bearing accounts and highly
liquid securities having a maturity of three months or less and approximates
fair value.
SHORT-TERM INVESTMENTS
The Company adopted Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities", effective
with the year ended December 31, 1994.
As of December 31, 1994, short-term investments in debt securities have been
categorized as available for sale and as a result are stated at fair value.
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.
22
23
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. The Company evaluates the
recoverability of goodwill based upon estimated future income of operating
entities. Other intangible assets acquired are being amortized over the period
for which benefit is derived which ranges from three to five years. Accumulated
amortization was $ 8,274,000 and $6,366,000 at December 31, 1995 and 1994,
respectively.
FOREIGN CURRENCY TRANSLATION
Aggregate foreign exchange gains or losses resulting from the translation of
foreign subsidiaries financial statements, which are denominated in the local
currency, are recorded as a separate component of shareholders' equity. Gains
and losses from foreign currency transactions are included in investment and
other income - net (See Note 8).
ACCOUNTING FOR INCOME TAXES
The Company accounts for income taxes in accordance with 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, 1995, 1994 and 1993 were 21,533,402, 21,458,099 and 21,470,672,
respectively.
FOREIGN CURRENCY CONTRACTS
The Company enters into forward exchange contracts and currency options,
principally to hedge the currency risk associated with 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, 1995 and 1994, the aggregate amount of
foreign exchange contracts was $6,500,000 and $1,500,000, respectively.
ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make certain estimates that affect
the reported financial position and results of operations.
ACQUISITIONS
In December 1995, the Company completed the acquisition of Ivory Tower
Publishing Company, Inc. The acquisition, accounted for as a purchase, was
funded entirely by the Company's cash. As of December 31, 1995 no goodwill was
recorded as the purchase price was equivalent to the estimated fair value of
the assets acquired and liabilities assumed.
23
24
In October 1994, the Company completed the acquisition of substantially all of
the assets, including inventory, of OddzOn Products, Inc., a toy company based
in Campbell, California. The acquisition, accounted for as a purchase, was
funded entirely by the Company's cash and $19,344,000 of goodwill was recorded.
Additional payments may be required based upon the attainment of certain future
operating profit levels of OddzOn Products, Inc. During the year ended December
31, 1995, $111,058 was charged to goodwill related to these additional
payments.
In October 1993, the Company acquired substantially all of the assets of Cap
Toys, Inc., a toy company based in Ohio, and $13,606,000 of goodwill was
recorded. Under the purchase agreement, additional payments may be required
based upon the attainment of certain operating profit levels of Cap Toys, Inc.
During the years ended December 31, 1995, and 1994, $1,047,000 and $2,563,000,
respectively, was charged to goodwill related to these additional payments.
NOTE 2 - SHORT-TERM INVESTMENTS
Short-term investments as of December 31, 1994 included tax - exempt municipal
bonds with a cost of $5,268,000 and a fair value of $5,203,000.
NOTE 3 - INVENTORY RESERVES
As of December 31, 1995 and 1994, the Company has recorded a reserve for
certain inventories to reflect the net realizable value of such inventories.
Management believes that such inventories are fairly stated. The reserve
balance as of December 31, 1995 and 1994 was $20,202,000 and $18,157,000,
respectively.
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
DECEMBER 31,
1995 1994
---------- -----------
Land......................... $ 6,053,000 $ 6,071,000
Buildings.................... 10,616,000 10,607,000
Machinery and equipment...... 21,303,000 21,899,000
Furniture and fixtures....... 6,865,000 6,197,000
Leasehold improvements....... 8,593,000 7,766,000
---------- -----------
53,430,000 52,540,000
Less accumulated depreciation
and amortization........... 28,633,000 27,242,000
---------- -----------
$ 24,797,000 $ 25,298,000
========== ===========
NOTE 5 - LINES OF CREDIT
Under its existing domestic bank lines of credit, which are renewed annually,
the Company has available $75,000,000 for direct borrowings and letters of
credit at any one time.
The maximum amount available to the Company's foreign operations at December
31, 1995 under local lines of credit is $13,099,000. These lines, which are
guaranteed by the Company, provide for direct borrowings, letters of credit,
and overdraft facilities.
In connection with the purchase of imported merchandise, the Company, at
December 31, 1995, had letters of credit outstanding under all lines of
$24,983,000.
24
25
NOTE 6 - ACCRUED EXPENSES
Accrued expenses as of December 31, 1995 and 1994 consist of the following:
DECEMBER 31,
1995 1994
------ ------
Accrued sales commissions....... $ 2,453,000 $ 1,625,000
Accrued advertising............. 2,869,000 2,653,000
Accrued payments related to
Cap Toys, Inc. agreement.... 1,047,000 2,349,000
Accrued litigation.............. 6,300,000 6,300,000
Accrued payroll and
incentive compensation...... 5,833,000 2,801,000
Other........................... 11,542,000 9,067,000
---------- ----------
$30,044,000 $24,795,000
========== ==========
NOTE 7 - RESTRUCTURING CHARGE
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. As of December 31,
1995, the remaining accrual primarily represents future lease obligations,
through 1997, related to previously closed facilities. One such facility is
leased from a partnership in which a director of the Company is a general
partner (See Note 10).
NOTE 8 - INVESTMENT AND OTHER INCOME - NET
The significant components of investment and other income - net for the years
ended December 31, 1995, 1994 and 1993 are as follows:
1995 1994 1993
--------- --------- ---------
Investment income.............. $1,896,000 $ 2,214,000 $ 3,033,000
Interest expense............... (235,000) (244,000) (617,000)
Foreign currency transactions.. ( 73,000) 87,000 (583,000)
Other.......................... 217,000 374,000 740,000
--------- -------- ---------
$1,805,000 $ 2,431,000 $ 2,573,000
========= ========= =========
NOTE 9 - INCOME TAXES
The Company and its domestic subsidiaries file a consolidated Federal income
tax return.
Income before income taxes was:
YEARS ENDED DECEMBER 31,
1995 1994 1993
---------- -------- ---------
United States $ 14,176,000 $4,225,000 $ 7,140,000
Foreign 11,397,000 2,799,000 10,433,000
---------- --------- ----------
$ 25,573,000 $7,024,000 $17,573,000
=========== ========= ==========
25
26
The provision for income taxes consists of the following:
YEARS ENDED DECEMBER 31,
CURRENTLY PAYABLE: 1995 1994 1993
------- ------ ------
Federal................. $ 9,602,000 $ 2,348,000 $ 2,785,000
Foreign................. 1,320,000 544,000 2,653,000
State................... 710,000 812,000 526,000
---------- --------- ---------
11,632,000 3,704,000 5,964,000
DEFERRED:
Federal................. (2,696,000) (3,023,000) (1,572,000)
Foreign................. 97,000 (342,000) (30,000)
State................... - 1,358,000 29,000
---------- --------- ---------
(2,599,000) (2,007,000) (1,573,000)
---------- --------- ---------
$ 9,033,000 $ 1,697,000 $ 4,391,000
========== ========= =========
A reconciliation of the provision for income taxes with amounts computed at the
statutory Federal rate is shown below:
YEARS ENDED DECEMBER 31,
1995 1994 1993
------ ------ ------
Tax at U.S. Federal statutory rate. $ 8,951,000 $ 2,458,000 $ 6,151,000
State income tax net of Federal
tax benefit...................... 272,000 287,000 342,000
Foreign rate differences........... 49,000 242,000 (1,029,000)
Charitable contributions........... - - (901,000)
Tax advantaged investment income... (173,000) (301,000) (561,000)
Provision for foreign dividends.... - (3,000,000) 1,200,000
Change in enacted rates............ - (52,000) (414,000)
Change in valuation allowance...... 164,000 1,275,000 750,000
Adjustment of estimated liabilities - 707,000 -
Other, net......................... (230,000) 81,000 (1,147,000)
--------- --------- ----------
$ 9,033,000 $ 1,697,000 $ 4,391,000
========= ========= ==========
As of December 31, 1995, the Company has State tax loss carryforwards of
approximately $1,242,000, tax effected, which expire between 1997 and 2010.
The Company has recorded a valuation allowance of $3,431,000 (primarily
relating to deferred State taxes and State tax loss carryforwards) to reflect
the estimated amount of deferred tax assets which may not be realized.
26
27
The components of the net deferred tax asset, net of the valuation allowance,
resulting from differences between accounting for financial and tax reporting
purposes were as follows:
DECEMBER 31,
ASSETS: 1995 1994
----------- -----------
Inventory capitalization................ $ 3,161,000 $ 2,174,000
Reserves not deducted for tax purposes.. 9,023,000 6,533,000
Accrued restructuring costs............. 1,264,000 1,695,000
Litigation.............................. 2,305,000 2,145,000
Charitable contribution carryforward.... - 1,270,000
Other................................... 1,049,000 681,000
---------- ----------
16,802,000 14,498,000
---------- ----------
LIABILITIES:
Depreciation............................ 27,000 259,000
Other................................... - 63,000
---------- ----------
27,000 322,000
---------- ----------
Net deferred tax asset.................. $16,775,000 $14,176,000
========== ==========
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. The amount of such earnings, permanently
reinvested, was approximately $56,394,000 as of December 31, 1995.
Determination of the net amount of unrecognized deferred tax liability with
respect to these earnings is not practicable.
NOTE 10 - RELATED PARTY TRANSACTIONS
Certain buildings, referred to in Note 11, 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, 1995, 1994 and 1993
were $4,042,000, $4,307,000 and $4,406,000, respectively. The Company is also
a guarantor under two mortgages for property so leased with a principal amount
aggregating approximately $8,281,000 as of December 31, 1995, $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, 1995, 1994 and 1993 were $996,000. This lease
obligation is included in the estimate for future lease obligations with
respect to the accrued restructuring costs (See Note 7).
NOTE 11 - LEASES
At December 31, 1995, 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-three years.
Rent expense for the years ended December 31, 1995, 1994 and 1993 amounted to
$8,450,000, $8,264,000 and $8,456,000, respectively.
27
28
The approximate aggregate minimum future rental payments as of December 31,
1995 under operating leases are as follows:
1996............................ $ 8,787,000
1997............................ 7,871,000
1998............................ 6,192,000
1999............................ 4,395,000
2000............................ 2,702,000
Later years..................... 10,283,000
NOTE 12 - STOCK OPTION AND EMPLOYEE STOCK PURCHASE PLANS
The Company has three stock option plans and an employee stock purchase plan.
As of December 31, 1995, there were 3,269,019 shares of common stock reserved
for issuance under all 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 Company's common stock as of the date the option is
granted and no options may be exercised within one year from the date of grant.
Options are exercisable at prices ranging from $9.59 to $21.17 per share under
the various plans. The exercise price of options exercised during 1995 ranged
from $10.09 to $14.875. Summarized stock option data follows:
Stock Option Stock Option
And Restricted Plans For Outside
Stock Option Plans Stock Plans* Directors*
-------------------- --------------- ----------------------
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
Granted during the year.... 234,269 37,117 15,000
Exercised during the year.. (73,168) (3,989) (12,000)
Cancelled during the year.. (147,563) (22,262) -
------- ------ ------
Outstanding as of
December 31, 1994... 945,658 96,768 75,000
Granted during the year.... 226,422 35,764 15,000
Exercised during the year.. (22,108) (4,458) (12,000)
Cancelled during the year.. (75,848) (9,015) (21,000)
--------- ------- ------
Outstanding as of
December 31, 1995 1,074,124 119,059 57,000
========= ======= ======
*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 the Company's 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
1995, 7,351 shares were issued under this plan. The 1994 Employee Stock
Purchase Plan has 137,668 shares reserved for future issuance.
28
29
The Company anticipates adopting Statement of Financial Accounting Standards
No. 123, "Accounting for Stock Based Compensation", for disclosure purposes
only and anticipates continuing to account for stock based compensation under
APB Opinion No. 25.
NOTE 13 - RETIREMENT PLAN AND 401(k) PLAN
Effective February 1, 1995, the Company converted its defined contribution
retirement plan to a 401(k) Plan. Employees may, up to certain prescribed
limits, contribute to the 401(k) Plan and a portion of these contributions is
matched by the Company. The provision for contributions charged to operations
for the year ended December 31, 1995 was $574,000.
There was no provision for contributions to the retirement plan charged to
operations for the year ended December 31, 1994. The provision for the
Company's contributions charged to operations for the year ended December 31,
1993 related to the Company's retirement plan was $1,991,000.
NOTE 14 - BUSINESS SEGMENTS AND GEOGRAPHIC AREAS
The Company's operations by business segment and geographic area are presented
below:
FINANCIAL DATA BY BUSINESS SEGMENT
REVENUES: 1995 1994 1993
-------- ------------ ------------
Gift.................... $ 213,918,000 $187,388,000 $266,458,000
Toys.................... 134,556,000 90,717,000 12,653,000
----------- ----------- -----------
Consolidated............ $ 348,474,000 $278,105,000 $279,111,000
=========== =========== ===========
OPERATING INCOME:
Gift.................... $ 19,775,000 $ 1,401,000 $ 26,739,000
Toys.................... 14,190,000 12,277,000 977,000
Corporate expense net
of investment income... (8,392,000) (6,654,000) (10,143,000)
---------- ----------- -----------
Consolidated............ $ 25,573,000 $ 7,024,000 $ 17,573,000
========== =========== ===========
IDENTIFIABLE ASSETS:
Gift*................... $ 188,331,000 $183,869,000 $232,905,000
Toys.................... 76,832,000 70,957,000 26,210,000
----------- ----------- -----------
Consolidated............ $ 265,163,000 $254,826,000 $259,115,000
=========== =========== ===========
DEPRECIATION AND AMORTIZATION:
Gift.................... $ 4,309,000 $ 5,250,000 $ 6,073,000
Toys.................... 2,899,000 1,735,000 292,000
----------- ----------- -----------
Consolidated............ $ 7,208,000 $ 6,985,000 $ 6,365,000
=========== =========== ===========
CAPITAL EXPENDITURES:
Gift.................... $ 3,829,000 $ 1,870,000 $ 5,109,000
Toys.................... 734,000 535,000 81,000
---------- ----------- -----------
Consolidated............ $ 4,563,000 $ 2,405,000 $ 5,190,000
========== =========== ===========
* Includes short - term investments
29
30
FINANCIAL DATA BY GEOGRAPHIC AREA
REVENUES: 1995 1994 1993
----------- ----------- ------------
United States........... $ 279,473,000 $228,833,000 $213,101,000
Europe.................. 29,698,000 23,024,000 33,230,000
Other Foreign........... 39,303,000 26,248,000 32,780,000
----------- ----------- -----------
Consolidated............ $ 348,474,000 $278,105,000 $279,111,000
=========== =========== ===========
NET INCOME:
United States........... $ 9,181,000 $ 2,730,000 $ 5,372,000
Europe.................. 652,000 (719,000) 2,434,000
Other Foreign........... 6,707,000 3,316,000 5,376,000
---------- ---------- ----------
Consolidated............ 16,540,000 $ 5,327,000 $13,182,000
========== ========== ==========
IDENTIFIABLE ASSETS:
United States........... $ 202,310,000 $189,731,000 $189,385,000
Europe.................. 29,153,000 29,119,000 30,877,000
Other Foreign........... 33,700,000 35,976,000 38,853,000
----------- ----------- -----------
Consolidated............ $ 265,163,000 $254,826,000 $259,115,000
=========== =========== ===========
NOTE 15 - 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.
NOTE 16 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following selected financial data for the eight quarters ended December 31,
1995 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.
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
FOR QUARTERS ENDED
1995 MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
--------- -------- --------- --------
Net sales............ $ 80,118 $ 74,263 $ 103,987 $ 90,106
Gross profit......... 40,794 35,587 54,537 42,947
Net income........... 4,083 154 9,260 3,043
Net income
per share.......... $ 0.19 $ 0.01 $ 0.43 $ 0.14
1994
Net sales............ $ 64,167 $ 57,546 $ 82,850 $ 73,542
Gross profit......... 32,606 25,313 42,754 33,565
Net income (loss).... 1,022 (3,327) 5,742 1,890
Net income (loss)
per share........... $ 0.05 $ (0.16) $ 0.27 $ 0.09
30
31
NOTE 17 - SUBSEQUENT EVENT
On January 17, 1996, the Company completed the sale of its subsidiary
Papel/Freelance, Inc. to Zebra Capital Corporation. The sale resulted in a
pre-tax gain of approximately $6,800,000 of which $4,800,000 will be recognized
in the first quarter of 1996 and $2,000,000 relates to a transitional agreement
and will be recognized, contingent upon satisfaction of the terms of the
agreement.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
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 through 3 of the 1996 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 page 3, "DIRECTOR COMPENSATION" on
pages 3 through 5, "EXECUTIVE COMPENSATION" on pages 11 through 13 and
"COMPENSATION COMMITTEE REPORT" on pages 6 and 7 in the 1996 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" on pages 9 and 10 and "SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS" on page 10 of the 1996 Proxy Statement, which is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
Information relating to this item appears under the captions "EXECUTIVE
COMPENSATION" on pages 11 through 13, "CERTAIN TRANSACTIONS" on pages 13
through 15 and "COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION" on
page 7 of the 1996 Proxy Statement, which is incorporated herein by reference.
31
32
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......................... 17
Consolidated Statement of Income for the
years ended December 31, 1995, 1994 and 1993.............. 18
Consolidated Statement of Changes in
Shareholders' Equity for the years ended
1995, 1994 and 1993....................................... 19
Consolidated Balance Sheet at December 31,
1995 and 1994............................................. 20
Consolidated Statement of Cash Flows for the
years ended December 31, 1995, 1994 and 1993.............. 21
Notes to Consolidated Financial Statements................ 22-31
2. FINANCIAL STATEMENT SCHEDULE:
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.
32
33
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.
2-8797 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.
33
34
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)
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)
- ---------
(4) Incorporated by reference to Registration Statement No. 2-88797 on Form S-1
as filed on February 2, 1984.
34
35
EXHIBIT NO.
- -----------
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)
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)
10.68 (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)
- ---------
(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.
(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.
(13) Incorporated by reference to Form S-8 Registration Statement No. 33-26161,
as filed on December 16, 1988.
35
36
EXHIBIT NO.
- -----------
10.73 Russ Berrie and Company, Inc. Deferred Compensation Plan. (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)
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)
- -------
(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.
(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.
36
37
EXHIBIT NO.
- -----------
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)
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)
--------
(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.
37
38
EXHIBIT NO.
- -----------
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)
10.109 Asset Purchase Agreement I.C. September 30, 1994 by and among RBCACQ,
Inc. and OddzOn Products, Inc., Scott Stillinger and Mark Button. (23)
10.110 Asset Purchase Agreement By and Among PF ACQUISITION CORP.,
ZEBRA CAPITAL CORPORATION, PAPEL/FREELANCE, INC. and
RUSS BERRIE AND COMPANY, INC. dated December 15, 1995. (24)
21.1 List of Subsidiaries
23.1 Report of Independent Accountants
23.2 Consent of Independent Accountants
27.1 Financial Data Schedule
- -------------
(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.
(23) Incorporated by Reference to Quarterly Report on Form 10-Q for the quarter ended
September 30, 1994.
(24) Incorporated by reference to Annual Report on Form 10-K for the year ended
December 31, 1995.
(b) REPORTS ON FORM 8-K
No reports on From 8-K were filed by the Company during the quarter ended
December 31, 1995.
38
39
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, 33-27406, 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.
39
40
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
- ---------------
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 3/26/96
- -------------------------------------------------------- --------------
Russell Berrie, Chairman of the Board,
Chief Executive Officer, and Director
(Principal Executive Officer)
/s/ A. Curts Cooke 3/25/96
- -------------------------------------------------------- --------------
A. Curts Cooke, President, Chief
Operating Officer and Director
(Principal Operating Officer)
/s/ Paul Cargotch 3/25/96
- -------------------------------------------------------- --------------
Paul Cargotch, Vice President - Finance
and Chief Financial Officer
(Principal Financial and Accounting Officer)
40
41
SIGNATURES DATE
---------- ----
/s/ Raphael Benaroya 3/28/96
- -------------------------------------------------- ---------------------
Raphael Benaroya, Director
/s/ Jimmy Hsu 3/28/96
- -------------------------------------------------- ---------------------
Jimmy Hsu, Director
/s/ Ilan Kaufthal 3/25/96
- -------------------------------------------------- ---------------------
Ilan Kaufthal, Director
/s/ Charles Klatskin 3/26/96
- -------------------------------------------------- ---------------------
Charles Klatskin, Director
/s/ Joseph Kling 3/25/96
- -------------------------------------------------- ---------------------
Joseph Kling, Director
- -------------------------------------------------- ---------------------
William A. Landman, Director
/s/ Sidney Slauson 3/25/96
- -------------------------------------------------- ---------------------
Sidney Slauson, Director
/s/ Bernard H. Tenenbaum 3/25/96
- -------------------------------------------------- ---------------------
Bernard H. Tenenbaum, Director
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RUSS BERRIE AND COMPANY, INC. AND SUBSIDIARIES
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
(DOLLARS IS THOUSANDS)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
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BALANCE AT BALANCE
BEGINNING CHARGED TO AT END
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS* OF PERIOD
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Allowance for accounts receivable:
Year ended December 31, 1993 $ 5,229 $ 2,198 $ 3,597 $ 3,830
Year ended December 31, 1994 3,830 5,581 3,760 5,651
year ended December 31, 1995 5,651 9,952 5,273 10,330
Allowance for slow moving
inventory items:
Year ended December 31, 1993 $11,650 $ 7,451 $ 3,323 $15,778
Year ended December 31, 1994 15,778 7,062 4,683 18,157
Year ended December 31, 1995 18,157 5,867 3,822 20,202
*Principally account write-offs, allowances and disposal of merchandise,
respectively.
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Exhibit Index
Exhibit Numbers
10.110 Asset Purchase Agreement By and Among PF ACQUISITION CORP., ZEBRA CAPITAL
CORPORATION, PAPEL/FREELANCE, INC. and RUSS BERRIE AND COMPANY, INC.
dated December 15, 1995
21.1 List of Subsidiaries
23.1 Report of Independent Accountants
23.2 Consent of Independent Accountants
27.1 Financial Data Schedule
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