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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
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(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM -------- TO --------
COMMISSION FILE NUMBER 0-1349
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ENESCO GROUP, INC.
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-1864170
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
225 WINDSOR DRIVE, ITASCA, ILLINOIS 60143
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (630) 875-5300
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock, par value $.125 New York Stock Exchange
per share, together with the Pacific Exchange
Associated Common Stock Purchase Rights
("Common Stock")
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant was $84,111,312 on March 1, 2002.
The number of shares outstanding of the registrant's Common Stock as of
March 1, 2002 was 13,788,350 shares.
Parts I, II and IV of this Form 10-K incorporate by reference certain
information from the registrant's Annual Report to Stockholders for the fiscal
year ended December 31, 2001 (the "2001 Annual Report"). Part III of this Form
10-K incorporates by reference certain information from the registrant's
definitive Proxy Statement, dated March 19, 2002 (the "Proxy Statement"), for
its Annual Meeting of Stockholders to be held on April 25, 2002.
P A R T I
ITEM 1. BUSINESS.
General
We are a leading designer, importer and international distributor of
creatively designed giftware items, including proprietary and licensed lines of
collectibles and home decorative accents. We sell our giftware, collectibles and
home decorative accents at wholesale to independent retailers, department
stores, mass merchants, catalogers and other distributors. Our products include
diverse lines of branded porcelain bisque, cold cast and resin figurines,
cottages, musicals, music boxes, ornaments, plush animals, waterballs, tableware
and general home accessories. Our products are primarily produced by independent
manufacturers in the Far East. In many instances, a factory's total capacity is
devoted exclusively to Enesco's product.
Enesco was incorporated in Massachusetts in 1931 as Stanley Home Products
and changed its name to Stanhome Inc. in 1982. In 1998, our stockholders voted
to change the company's name from Stanhome Inc. to Enesco Group, Inc. To
complete our transformation into a singularly focused international designer and
distributor of branded gifts, collectibles and decorative home accents, at the
beginning of 2000 we merged certain of our direct and indirect subsidiaries,
including Enesco Corporation, into Enesco Group, Inc. Our corporate offices are
located at 225 Windsor Drive, Itasca, Illinois 60143-1225. Our telephone number
at that location is (630) 875-5300.
Product
Enesco's giftware, collectible and home and garden decorative product
lines consist of approximately 24,000 items worldwide, including approximately
8,000 items sold in the United States. These product lines are based in part on
Enesco's collection of proprietary designs and in part on licenses Enesco and
its subsidiaries have obtained from independent creative designers. Among
Enesco's best known licensed lines are:
- Precious Moments
- Cherished Teddies
- Walt Disney Company
- Mary Engelbreit
- John Deere
- Mahogany Princess
- Raggedy Anne & Andy
- Country Living
- Coca-Cola
- Jim Shore
- Kim Anderson's Pretty as a Picture
- Powerpuff Girls
- Julie Ueland
- Wizard of Oz
Enesco's best known proprietary product lines include:
- Growing Up Girls
- Lilliput Lane
- Circle of Love
- Border Fine Arts
- Mary's Moo Moos
For our collectible lines, including Precious Moments and Cherished
Teddies, we introduce new items and limited edition pieces each year. To allow
for these new introductions and to keep each line balanced, traditionally we
have retired a number of the existing pieces from production each year.
Retirement of an item usually increases the value of the item on the secondary
market and supports the overall collectibility of the line. We base our decision
to retire a piece on a number of factors, including consumer demand, marketing
and manufacturing considerations.
Enesco offers a wide range of other giftware and home and garden
decorative items to satisfy seasonal and non-seasonal consumer demand. In 2001,
we introduced a line of everyday gift licensed products for our mass merchant
accounts. The line offers everyday giftware product that is distinct from that
being sold at our independent gift retailers. During 2002, we expect to expand
this program to multiple mass accounts. Also during 2002, we plan to introduce a
new home product line and merchandising system developed exclusively for
Wal-Mart. Most of our products have suggested retail prices between $5 and $50.
In an effort to expand the breadth of our product offerings, during 2001
we entered into a distribution arrangement with Lamplight Farms for Enesco to
sell a line of candle products in the United States. Also, Enesco recently
became the exclusive distributor in the United States for a line of plush
animals and coordinating fashion accessories manufactured by NICI AG for the
'tween market. NICI AG is a leading line of plush animals and coordinating
accessories in Europe.
-2-
Enesco plans to enter into more strategic alliances for new product distribution
opportunities.
During 2001, we undertook a comprehensive review of all products being
sold and under development. Using an analysis based on profitability, we reduced
the number of items in our product lines. We plan to continue this approach for
all product lines going forward. We will continue to introduce new product
offerings, on a selective basis, and will limit quantities of many items in our
collectible lines.
Customers
Our core customers are approximately 27,000 independent gift retailers
worldwide. In addition, we sell to national chains, mass merchants, department
stores and catalogers, including Carlton Cards stores, Avon, Harry & David,
Walgreens, CVS, Wal-Mart, K-Mart, Sears and Target. No single account
represented more than 5% of Enesco's sales in 2001.
Sales and Marketing
Effective January 1, 2001, Enesco began utilizing an account
management-focused sales team comprised of field sales employees, replacing its
historical structure of card and gift channel independent contractor sales
representatives based throughout the United States. The majority of the field
sales organization is made up of former independent contractors, who received
in-depth account management training as Enesco employees. Beginning in the
fourth quarter of 2001, we added more field sales representatives, bringing the
total to approximately 150, and as of January 2002 changed the compensation
program for all field sales representatives to commission based from the salary
plus bonus expense structure in effect for 2001.
Smaller accounts in the card and gift channel in the United States and
those that are geographically remote, are handled by Enesco's inside sales
account managers. They are trained to sell on the telephone to retailers,
including prospecting for new accounts and contacting customers who have not
been contacted by the field sales team in the past few years. In addition, we
continue to utilize a team of sales executives to manage our larger, national
accounts.
Commencing January 2002, Enesco's high end Milieu home decor line is being
sold in the U.S. by 11 independent representative selling groups with the
capacity of reaching customers not previously served by Enesco, such as The
Great Indoors.
The Canadian, French and the United Kingdom operations have their own
employee sales organizations. Enesco also has agreements with foreign affiliates
or distributors in Australia, Canada, Ecuador, France, Germany, Hong Kong,
Japan, Malaysia, The Netherlands, New Zealand, Paraguay, Peru, Philippines,
Singapore, South Korea, Taiwan, Thailand and the United Kingdom. In addition to
selling various product lines in the U.K. and several other European countries,
Enesco European Giftware Group Limited, a subsidiary of Enesco Group, Inc., with
its headquarters located in Carlisle, Cumbria, England, oversees the operations
of our affiliated company located in France. Enesco European Giftware Group also
administers the collectors clubs that are based in the United Kingdom and
Europe. Our Canadian subsidiary, N.C. Cameron, also sells various product lines
in Canada and administers the collectors clubs based in Canada.
Net international sales in 2001 decreased 1% compared to 2000 and
comprised approximately 29% of the Company's sales in 2001, compared with
approximately 24% in 2000 and 23% in 1999. Local currency international sales
were translated into U.S. dollars at lower exchange rates in 2001 versus 2000.
If the 2001 local currency sales were translated into U.S. dollars at the 2000
exchange rates, international sales would have been greater by approximately 4%
in 2001. See also Note 8 to Consolidated Financial Statements appearing on Page
30 of the 2001 Annual Report which is incorporated herein by reference.
We believe that Enesco's general terms of sale are competitive in the
giftware industry. During 2001, Enesco began offering dating programs in the
U.S. to its retail customers in the card, gift and collectible channel. These
programs extend the payment due date for products, providing the retailer the
opportunity to sell the item prior to paying Enesco.
-3-
We support the marketing efforts of our sales force with promotional
programs, including displays of our product lines in eight showrooms located
throughout the United States, participation at trade and private shows held in
major U.S. and foreign cities, trade and consumer advertising and annual
catalogs. In addition, we maintain an interactive consumer information Internet
website at www.enesco.com and maintain toll-free telephone lines for retail
customers and consumers.
Enesco's collectors clubs are an important component of the marketing
program for our collectible product lines. Consumers may subscribe for exclusive
product offerings and newsletters from Enesco's clubs. During 2001, the number
of active memberships for the collectors clubs continued a downward trend.
Design and Production
Enesco has a continuous product development program. New items are added
to the product line only if they can be produced and marketed on a basis that
meets our profitability criteria. We believe that our ability to design, produce
and market new products provides a competitive advantage in the giftware
industry, since product sales are in part dependent on our ability to identify
and respond quickly to changing trends and to utilize our design and production
systems to bring new product to market.
The products included in the Lilliput Lane and Border Fine Arts lines are
supplied in part by manufacturing plants owned by Enesco's subsidiaries
operating in England and Scotland, respectively. During 2001, one of our
manufacturing plants in England was closed, shifting this production to the
remaining United Kingdom sites or Asia. Substantially all of Enesco's other
product lines are produced by independent manufacturers in the Far East, under
the supervision of personnel from Enesco's affiliate in Hong Kong, Enesco
International (H.K.) Limited, and in the Philippines, Indonesia, Thailand,
Europe and Canada.
During 2001, Enesco's purchases from its three largest contract
manufacturers accounted for approximately 35%, 22% and 15%, respectively, of its
total purchases with no other single manufacturer accounting for more than 10%
of Enesco's net purchases. During 2001, approximately 70% of Enesco's total
product purchases came from manufacturing sources located in the People's
Republic of China (P.R.C.), which enjoys most-favored nation trade status. While
we believe that there are other manufacturing sources available for our product
lines, any loss or substantial reduction of sourcing capability from one or more
of its predominant manufacturing facilities could have a significant short-term
adverse effect on Enesco's operations.
In 2001, we renegotiated the payment terms to certain of our vendors,
resulting in substantial cash flow improvement to Enesco. We also initiated a
global procurement and new product development strategy, realizing volume
discounts for our U.S. operations and foreign subsidiaries. We expect this
global procurement approach to reduce our product costs in 2002.
Enesco has a Vendor Certification Program that requires all manufacturing
sources, whether affiliates or contract manufacturers, to agree to, and comply
with, quality compliance and labor standards established and enforced by Enesco.
Distribution
In order to serve our customers located in the United States, and to a
certain extent international customers as well, product is shipped by ocean
freight from abroad and then by rail or truck to Enesco's main warehouse and
distribution facility, located in Elk Grove Village, Illinois. This warehouse
facility also serves as Enesco's primary distribution facility and main
showroom. Commencing in 2002, Enesco has begun to use a third party warehouse
and distribution facility in Fort Mills, South Carolina to handle the
distribution of certain product to mass merchants. Shipments from Enesco to its
customers are handled by United Parcel Service and other commercial carriers.
Outside of the United States, the main warehouse and distribution facility
for Enesco European Giftware Group is located in Carlisle, Cumbria, England.
There is also a smaller warehouse and distribution facility located in France.
N.C. Cameron's main warehouse and distribution facility is located in
Mississauga, Ontario, Canada.
-4-
Seasonality and Backlog
In addition to our everyday gift products, we produce specially designed
product for holiday seasons, including Christmas, Valentine's Day, Easter,
Mother's Day, Father's Day, Halloween and Thanksgiving. The pattern of our sales
is influenced by the shipment of seasonal merchandise. During 2001, our sales
peaked in the third quarter.
At the end of 2001, Enesco had a backlog of orders totaling approximately
$28 million, as compared to $48 million at the end of 2000. It is standard
practice in the giftware industry, however, that orders are subject to amendment
or cancellation by customers prior to shipment. Due to the many external factors
that can impact the status of unshipped orders at any particular time, the
comparison of backlog orders in any given year with those at the same date in a
prior year is not necessarily indicative of sales performance for that year or
for prospective sales results in future years. Backlog orders can also be
affected by various programs used by Enesco to provide an incentive for its
customers to place orders and accept shipments at specified times in the year.
Competition
Competition in the giftware, collectibles and decorative accent industry
in the United States, Canada, United Kingdom and Europe is highly fragmented
among a number of companies and product categories. The principal factors
affecting success in the marketplace are originality of product design, quality,
price, marketing ability, customer service and sourcing. Enesco's main
competitors in the United States are Hallmark, Department 56, Lladro, Cast Art,
Boyd's Bears, Ty, Inc. and Russ Berrie, among others.
Trademarks and Other Intellectual Property
The intellectual property rights associated with Enesco's licensed product
lines are materially important to our sales, especially the Precious Moments(R)
and Cherished Teddies(R) lines, which accounted for approximately 39% and 13%,
respectively, of Enesco's consolidated revenue during 2001, compared to 38% and
14%, respectively, for 2000 and 37% and 22% for 1999. The Precious Moments
license currently has a term through December 31, 2007 and the Cherished Teddies
license currently has a term through December 31, 2010.
We continuously enter into various license agreements relating to
trademarks, copyrights, designs and products which enables us to market new
items compatible with our product lines. Our licenses are either non-exclusive
or exclusive for specific products in specified channels and territories.
Royalties are paid on licensed items and, in some cases, advance royalties or
minimum guarantees are required by these license agreements.
Protection of all of Enesco's intellectual property, whether owned or
licensed, is important to our business. We maintain an aggressive and visible
program to identify and challenge companies and individuals worldwide who
infringe our registered trademarks and copyrighted designs.
Employees and Related Matters
As of December 31, 2001, Enesco employed 684 persons in the United States.
This reflects the workforce reductions that occurred in 2001, eliminating
approximately 170 positions in the United States. Enesco's U.S.-based warehouse
personnel employed as of December 31, 2001 are represented by Local Union No.
781 of the Teamsters under a contract that expired on June 30, 2001. We have
been in negotiation with union representatives over the terms of a new contract.
Our warehouse employees have been working without a contract and we believe that
overall labor relations are good. As of December 31, 2001, Enesco's foreign
subsidiaries employed 718 persons.
Effective January 1, 2001, Enesco began utilizing an account
management-focused sales team comprised of field sales employees, replacing its
historical structure of card and gift channel independent contractor sales
representatives based throughout the United States. Beginning in the fourth
quarter of 2001, additional field sales representatives were added, bringing the
total number of field sales persons to approximately 150. The compensation
program for field sales personnel also became commission based as of January
2002. Enesco continues to utilize inside sales employees to manage national
accounts and smaller accounts on a telemarketing basis.
-5-
Financial and Other Information
Information required by this item is set forth in the sections entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" beginning at Page 10 of the Annual Report, and "Notes to
Consolidated Financial Statements" beginning at Page 23 of the Annual Report,
and is incorporated herein by reference.
ITEM 2. PROPERTIES.
Enesco owns its principal executive offices in the United States located
at 225 Windsor Drive, Itasca, Illinois and its showroom, distribution and
warehouse facilities in Elk Grove Village, Illinois. Both of these properties
are subject to a mortgage. We also lease showrooms in seven other major market
locations in the U.S. for the display of our products and a warehouse in West
Chicago, Illinois.
Most of the principal physical properties relating to the foreign
subsidiaries of the Enesco Giftware Group are leased. These include Enesco
European Giftware Group Limited, which leases manufacturing plants and warehouse
facilities in Penrith, Workington, and Carlisle, Cumbria, England, and Langholm,
Dumfriesshire, Scotland. These manufacturing facilities are generally operating
at or near capacity. N.C. Cameron leases its office and distribution building in
Mississauga, Ontario, Canada.
ITEM 3. LEGAL PROCEEDINGS.
In the ordinary course of Enesco's business, there have arisen various
legal proceedings pending against Enesco and its subsidiaries. While we cannot
predict the eventual outcome of these proceedings, we believe that none of these
proceedings will have a material adverse impact upon the consolidated financial
statements of Enesco.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following persons are Executive officers of Enesco as of March 1,
2002:
Name Age Positions Date First Elected
- ---- --- --------- ------------------
Daniel DalleMolle 51 President and Chief Executive Officer 3/28/01
Prior to Mr. DalleMolle joining Enesco in March 2001, he was Group
President of the Hardware and Tool Companies of Newell Rubbermaid, Inc. from
1999 until 2001. From 1998 until 1999, he was President and Chief Operating
Officer of Intermatic, Inc., a low voltage lighting and timer manufacturer. From
1996 until 1998, he was President of Lee Rowan Company, a wire, plastic and wood
manufacturer of storage products and from 1992 until 1996, he was President of
Anchor Hocking Co., both wholly owned subsidiaries of Newell Rubbermaid.
Eugene Freedman 77 Director 9/04/97
Founding Chairman 9/02/98
Member of the Executive Committee 9/04/97
Mr. Freedman previously served as Vice Chairman of Enesco from October,
1997 to September, 1998, Executive Vice President of Enesco from April, 1988 to
September, 1998, and Vice President of Enesco from January, 1984 to April, 1998.
He also served for many years as Chairman, President and Chief Executive Officer
of Enesco Corporation, a subsidiary of Enesco Group, Inc., of which Mr. Freedman
was a founder in 1959.
Jeffrey W. Lemajeur 40 Chief Financial Officer 2/01/01
Treasurer 3/03/99
-6-
Prior to Mr. Lemajeur joining Enesco in January, 1999, he was the Vice
President of Finance, Chief Financial Officer and Treasurer of Binks Sames
Corporation, a manufacturer of spray equipment located in Franklin Park,
Illinois, from 1991 to 1998.
Jeffrey S. Smith 45 Senior Vice President, Operations 9/06/01
Prior to Mr. Smith joining Enesco in June 2001, he was the Vice President
of Supply Chain from 1997 until June 2001, at Rauch Industries, a manufacturer
and distributor of Christmas merchandise, and a division of Syratech
Corporation. From 1994 to 1997, he was Vice President of Operations of Ambrosia
Industries, a manufacturer and marketer of glass giftware. Before joining
Ambrosia, Mr. Smith held numerous positions with at Anchor Hocking Co., a wholly
owned subsidiary of Newell Rubbermaid, Inc.
Paul B. Perez 55 Senior Vice President, 9/6/01
Sales, Marketing and Product Development
Prior to Mr. Perez joining Enesco in June 2001, he was President of
Kirsch, a manufacturer and distributor of window hardware and treatments and a
wholly owned subsidiary of Newell Rubbermaid, Inc. from January 2001 until June
2001. Prior to joining Kirsch, Mr. Perez was President of Newell International,
a global manufacturer and marketer of branded consumer goods, from December 1996
until December 2000. Before joining Newell Rubbermaid, Mr. Perez held marketing
positions with Corning, Revlon, Platex and Lever Brothers.
Josette V. Goldberg 44 Senior Vice President, Human
Resources and Administration 1/17/01
Senior Vice President, Human Resources 1/19/00
Vice President, Human Resources 6/02/99
Prior to Ms. Goldberg joining Enesco in February 1998,she was the Vice
President of Human Resources for Household Finance Corporation, a consumer
finance division of Household International from 1996 to 1998. Previously, she
spent 11 years with Balcor Company, a real estate and property management
division of American Express where she held the position of Senior Vice
President of Human Resources and Administration.
M. Frances Durden 45 Clerk 3/01/01
Vice President, General Counsel
and Secretary
Ms. Durden previously served as Corporate Counsel of Enesco from January,
1999 until February, 2001. Prior to Ms. Durden joining Enesco in January 1999,
she served as Senior Vice President and General Counsel of Michael Anthony
Jewelers, Inc. in Mt. Vernon, New York, from 1994 to January, 1999. Prior to
that, she practiced corporate law with an Ohio law firm.
Charles E. Sanders 53 Assistant Treasurer 2/28/01
Prior to Mr. Sanders joining Enesco in December, 2000, he served in
various positions from 1971 to 2000, including Vice President, Treasurer and
Corporate Secretary, with RDM Sports Group, Inc. or its predecessors in Atlanta,
GA.
NOTE: All officers are elected for the ensuing year and until their successors
are duly elected and qualified.
-7-
P A R T II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Information required by this item is set forth in the Section entitled
"Stock Market, Dividend and Shareholder Information" appearing on page 33 of the
2001 Annual Report and is incorporated herein by reference.
Enesco did not declare any dividends in 2001. Future dividends and
resumption of the stock repurchase program will depend on future financial
results.
ITEM 6. SELECTED FINANCIAL DATA.
Information required by this item is set forth in the Section entitled
"Financial Highlights Last Five Years" appearing on page 35 of the 2001 Annual
Report and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION.
Information required by this item is set forth in the Section entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing on pages 10 through 17 of the 2001 Annual Report and is
incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Information required by this item is set forth in the Section entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Market Risk" appearing on page 16 of the 2001 Annual Report and is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Information required by this item is set forth in the Financial
Statements, together with the accompanying Notes and Report of Independent
Public Accountants, appearing on pages 18 through 32 of the 2001 Annual Report
and is incorporated herein by reference. Also incorporated herein by reference
are the Quarterly Results (Unaudited) during 2001 and 2000 set forth on page 34
of the 2001 Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
P A R T III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information required by this item regarding the directors of the Company
is set forth under the captions "Proposal 1: Election of Directors" and
"Information as to Board of Directors and Nominees" in the Company's Proxy
Statement and is incorporated herein by reference. Information required by this
item regarding the executive officers of the Company is included under a
separate caption in Part I hereof, and is incorporated herein by reference, in
accordance with General Instruction G(3) of Form 10-K and Instruction 3 to Item
401(b) of Regulation S-K. Information required by this item regarding reporting
compliance is included under the caption "Section 16(a) Beneficial Ownership
Reporting Compliance" in the Company's Proxy Statement and is incorporated
herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
Information required by this item is set forth under the captions
"Executive Compensation", "Compensation and Stock Option Committee Report on
Executive Compensation", "Performance Graphs", "Compensation of Non-Employee
Directors" and "Compensation Committee Interlocks and Insider Participation" in
the Company's Proxy Statement and is incorporated herein by reference.
-8-
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Security Ownership of Certain Beneficial Owners
Information required by this item is set forth under the caption "Our
Largest Stockholders" and "Shares Held By Our Directors and Executive Officers"
in the Company's Proxy Statement and is incorporated herein by reference.
Security Ownership of Management
Information required by this item is set forth under the caption "Shares
Held by Our Directors and Executive Officers" in the Company's Proxy Statement
and is incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information required by this item is set forth under the caption
"Compensation Committee Interlocks and Insider Participation" in the Company's
Proxy Statement and is incorporated herein by reference.
P A R T IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(1) and (2) Financial Statements and Schedules. The financial
statements and schedules required by this item are listed in the Index to
Financial Statements and Schedules of Enesco Group, Inc. on page 12 of this Form
10-K.
(a)(3) Exhibits. The exhibits required by this item are listed in
the Exhibit Index on pages 15 - 17 of this Form 10-K. The management contracts
and compensatory plans or arrangements required to be filed as an exhibit to
this Form 10-K are listed as Exhibits 10(a) to 10(w) in the Exhibit Index.
(b) Reports on Form 8-K. No reports on Form 8-K were filed by the
Company during the fourth quarter of 2001.
FORWARD LOOKING STATEMENTS
This Form 10-K including all information incorporated by reference into
this Form 10-K, contains certain forward-looking statements within the meaning
of the Federal securities laws. These forward-looking statements may include the
words "believe," "expect," "plans" or similar words and are based in part on
Enesco's reasonable expectations and are subject to a number of factors and
risks, many of which are beyond Enesco's control. Enesco's future results may
differ materially from its current results and actual results could differ
materially from those projected in the forward-looking statements contained in,
and incorporated by reference into, this Form 10-K as a result of certain
factors including, but not limited to, those set forth below. Readers should
also carefully review any risk factors described in other documents that we file
from time to time with the Securities and Exchange Commission.
- Our ability to manufacture, increase capacity, source and ship new
and continuing product in a timely manner and consumers' acceptance
of those products at prices that will be sufficient to profitably
recover development, manufacturing, marketing, royalty and other
costs of the products;
- economic conditions including retail sales, higher fuel prices,
currency fluctuations and government regulation and other actions in
the various markets in which we operate throughout the world;
- the inventory policies of retailers, together with the increased
reliance by retailers on quick response inventory management
techniques, which increase the risk of underproduction of popular
items, overproduction of less popular items and failure to achieve
tight and compressed shipping schedules;
-9-
- the impact of competition on revenues, margins and other aspects of
Enesco's business, including the ability to secure, maintain and
renew popular licenses and the ability to attract and retain
talented employees.
In light of these uncertainties and risks, there can be no assurance that
the forward-looking statements in this Form 10-K will occur or continue in the
future. Except for required, periodic filings under the Securities Exchange Act
of 1934, Enesco undertakes no obligations to release publicly any revisions to
these forward looking statements that may reflect events or circumstances after
the date hereof or to reflect the occurrence of unanticipated events.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 26th day of
March, 2002.
ENESCO GROUP, INC.
------------------
(Registrant)
By: /s/ Daniel DalleMolle
-------------------------------
Daniel DalleMolle
President and Chief
Executive Officer
By: /s/ Jeffrey W. Lemajeur
-------------------------------
Jeffrey W. Lemajeur
Chief Financial Officer
and Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below on the 26th day of March, 2002 by the
following persons on behalf of the registrant and in the capacities indicated.
Signature Title
/s/ Daniel DalleMolle
- ------------------------
Daniel DalleMolle Director, President and
Chief Executive Officer
/s/ Homer G. Perkins *
- ------------------------
Homer G. Perkins Director
/s/ John F. Cauley *
- ------------------------
John F. Cauley Director
/s/ Anne-Lee Verville *
- ------------------------
Anne-Lee Verville Chairman of the Board,
Director
/s/ Judith R. Haberkorn *
- ------------------------
Judith R. Haberkorn Director
/s/ Donna Brooks Lucas *
- ------------------------
Donna Brooks Lucas Director
/s/ Eugene Freedman *
- ------------------------
Eugene Freedman Founding Chairman and
Director
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/s/ George R. Ditomassi *
- ------------------------
George R. Ditomassi Director
/s/ Thane A. Pressman *
- ------------------------
Thane A. Pressman Director
/s/ Donald L. Krause *
- ------------------------
Donald L. Krause Director
*By: /s/ Daniel DalleMolle
---------------------------
Daniel DalleMolle
Attorney-In-Fact
-11-
ENESCO GROUP, INC.
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS - Incorporated by reference to "Report
of Independent Public Accountants" on page 32 of the Enesco Group, Inc.
2001 Annual Report to Stockholders.
FINANCIAL STATEMENTS - All of which are incorporated by reference to the Enesco
Group, Inc. 2001 Annual Report to Stockholders.
Consolidated Balance Sheets as of December 31, 2001 and 2000
Consolidated Statements of Income For the Years Ended December 31, 2001,
2000 and 1999
Consolidated Statements of Retained Earnings For the Years Ended December
31, 2001, 2000 and 1999
Consolidated Statements of Comprehensive Income For the Years Ended
December 31, 2001, 2000 and 1999
Consolidated Statements of Cash Flows For the Years Ended December 31,
2001, 2000 and 1999
Notes to Consolidated Financial Statements as of December 31, 2001, 2000
and 1999
Quarterly Results (Unaudited)
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON PAGE 13
SCHEDULE SUPPORTING FINANCIAL STATEMENTS:
Schedule
Number Description
- --------- -----------
II Valuation and Qualifying Accounts and Reserves For
Each of the Three Years Ended December 31, 2001(a)
NOTES:
(a) All other schedules are not submitted because they are not
applicable, not required or because the required information is
included in the consolidated financial statements or notes thereto.
(b) Individual financial statements of the Company have been omitted
since (1) consolidated statements of the Company and its
subsidiaries are filed and (2) the Company is primarily an operating
company and all subsidiaries included in the consolidated financial
statements filed are wholly-owned and do not have a material amount
of debt to outside persons.
-12-
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Enesco Group, Inc.:
We have audited in accordance with auditing standards generally accepted in the
United States, the consolidated financial statements included in Enesco Group,
Inc.'s annual report to shareholders incorporated by reference in this Form
10-K, and have issued our report thereon dated February 20, 2002. Our audit was
made for the purpose of forming an opinion of the consolidated financial
statements taken as a whole. The schedule listed in the accompanying index is
the responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic consolidated financial statements. This schedule has been subjected to
the auditing procedures applied in the audit of the consolidated financial
statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation to the consolidated
financial statements taken as a whole.
/s/ Arthur Andersen LLP
Chicago, Illinois
February 20, 2002
-13-
ENESCO GROUP, INC. SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR EACH OF THE THREE YEARS ENDED DECEMBER 31, 2001
Column A Column B Column C Column D Column E
Additions
Balance at Charged to Charged to Balance at
Beginning of Costs and Other End of
Period Expenses Accounts Deductions Period
---------------------------------------------------------------------------------
Description
FOR THE YEAR ENDED DECEMBER 31, 1999
Reserves which are deducted in the balance
sheet from assets to which they apply-
Reserves for uncollectible accounts $ 7,211,288 $ 3,318,106 $ -- $ 3,268,744 $ 7,260,650
Reserves for returns and allowances $ 2,089,182 $13,038,165 $ -- $11,972,237 $ 3,155,110
Accumulated amortization of other assets $29,632,037 $ 2,224,491 $ -- $ 15,025 $31,841,503
Reserve for downsizing corporate headquarters $10,552,000 $ -- $ -- $ 4,087,020 $ 6,464,980
Reserve for discontinued operations $ 2,832,000 $ -- $ -- $ 512,664 $ 2,319,336
FOR THE YEAR ENDED DECEMBER 31, 2000
Reserves which are deducted in the balance
sheet from assets to which they apply-
Reserves for uncollectible accounts $ 7,260,650 $ 1,311,859 $ -- $ 4,355,146 $ 4,217,363
Reserves for returns and allowances $ 3,155,110 $ 9,988,091 $ -- $10,068,640 $ 3,074,561
Accumulated amortization of other assets $31,841,503 $ 2,658,267 $ -- $ 55,058 $34,444,712
Reserve for downsizing corporate headquarters $ 6,464,980 $ -- $ -- $ 3,086,284 $ 3,378,696
Reserve for discontinued operations $ 2,319,336 $ -- $ -- $ 1,994,735 $ 324,601
FOR THE YEAR ENDED DECEMBER 31, 2001
Reserves which are deducted in the balance
sheet from assets to which they apply-
Reserves for uncollectible accounts $ 4,217,363 $ 2,451,986 $ -- $ 3,810,399 $ 2,858,950
Reserves for returns and allowances $ 3,074,561 $ 7,396,676 $ -- $ 8,722,844 $ 1,748,393
Accumulated amortization of other assets $34,444,712 $ 1,950,987 $ -- $ 78,275 $36,317,424
Reserve for downsizing corporate headquarters $ 3,378,696 $ -- $ -- $ 2,116,551 $ 1,262,145
Reserve for discontinued operations $ 324,601 $ -- $ -- $ 58,614 $ 265,987
-14-
EXHIBIT INDEX
Reg. S-K
Item 601 EXHIBIT
- -------- -------
2 (a)* Stock and Asset Purchase Agreement dated as of November 24,
1997 by and between Stanhome Inc. and Laboratoires De Biologie
Vegetale Yves Rocher. (Exhibit 2.1 to Form 8-K filed on
December 31, 1997 in Commission File No. 0-1349.)
3 (a)* Restated Articles of Organization as amended. (Exhibit 3(a) to
Form 10-Q filed for the period ended March 31, 1998 in
Commission File No. 0-1349.)
3 (b)* By-Laws as amended. (Exhibit 3 (b) to Form 10-Q filed for the
period ended March 31, 1998 in Commission File No. 0-1349.)
4 (a)* Renewed Rights Agreement dated as of July 22, 1998 between
Enesco Group, Inc. and Mellon Investor Services L.L.C.
(Exhibit 4 to Form 8-K filed on July 23, 1998 in Commission
File No. 0-1349.)
4 (b)* Warrant Agreement dated June 29, 2000 by and between Enesco
Group, Inc. and Warner Bros. (Exhibit 4 to Form 10-Q filed for
the period ended June 30, 2000 in Commission File No. 0-1349.)
10 (a)* 1984 Stock Option Plan, as amended and restated through
December 4, 1996. (Exhibit 10 (a) to Form 10-K filed for the
period ended December 31, 1996 in Commission File No. 0-1349.)
10 (b)* 1991 Stock Option Plan, as amended and restated through
December 4, 1996. (Exhibit 10 (b) to Form 10-K filed for the
period ended December 31, 1996 in Commission File No. 0-1349.)
10 (c)* Special Interim Chief Executive Officer Stock Option Plan.
(Exhibit 10(c) to Form 10-K filed for the period ended
December 31, 1993 in Commission File No. 0-1349.)
10 (d)* 1996 Stock Option Plan, as amended and restated through
January 20, 1999. (Exhibit 10(d) to Form 10-K filed for the
period ended December 31, 1998 in Commission File No. 0-1349.)
10 (e)* 1998 Chairman Stock Option Plan. (Exhibit 10(f) to Form 10-K
filed for the period ended December 31, 1998 in Commission
File No. 0-1349.)
10 (f)* Non-Employee Director Stock Plan. (Exhibit 10 to Form 10-Q
filed for the period ended March 31, 1995 in Commission File
No. 0-1349.)
10 (g)* Enesco Group, Inc. 1999 Non-Employee Director Stock Plan.
(Exhibit 10(h) to form 10-K filed for the period ended
December 31, 1998 in Commission File No. 0-1349.)
10 (h)* Management Incentive Plan, as amended and restated effective
January 1, 1999. (Exhibit 10(j) to Form 10-K filed for the
period ended December 31, 1998 in Commission File No. 0-1349.)
10 (i)* Allan G. Keirstead Release Agreement. (Exhibit 10(j) to Form
10-K filed for the period ended December 31, 2000 in
Commission File No. 0-1349.)
-15-
10 (j)* Jeffrey A. Hutsell Release Agreement. (Exhibit 10.2 to Form
10-Q filed for the period ended September 30, 2000 in
Commission File No. 0-1349.)
10 (k)* Form of Change in Control Agreement. (Exhibit 19(c) to Form
10-K filed for the period ended December 31, 1992 in
Commission File No. 0-1349.) A substantially identical
agreement exists with Daniel DalleMolle and Eugene Freedman.
10 (l)* Form of Change in Control Agreement with certain executive
officers and non-executive officers (Exhibit 19(c) to Form
10-K filed for the period ended December 31, 1991 in
Commission File No. 0-1349.) Substantially identical
agreements exist with M. Frances Durden, Josette V. Goldberg,
Jeffrey W. Lemajeur, Paul B. Perez and Jeffrey S. Smith.
10 (m)* Enesco Group, Inc. Supplemental Retirement Plan, as amended
and restated, effective January 1, 1999. (Exhibit 10(y) to
Form 10-K filed for the period December 31, 1998 in Commission
File No. 0-1349.)
10 (n)* License Agreement between Precious Moments, Inc. and Enesco
Corporation. (Exhibit 10 to Form 10-Q filed for the period
ended June 30, 1993 in Commission File No. 0-1349.)
10 (o)* First Amendment to License Agreement between Precious Moments,
Inc. and Enesco Corporation. (Exhibit 10(hh) to Form 10-K
filed for the period ended December 31, 1997 in Commission
File No. 0-1349.)
10 (p)* Second Amendment to License Agreement between Precious
Moments, Inc. and Enesco Corporation. (Exhibit 10(bb) to Form
10-K filed for the period ended December 31, 1998 in
Commission File No. 0-1349.)
10 (q)* Third Amendment to License Agreement between Precious Moments,
Inc. and Enesco Group, Inc.(Exhibit 10.1) to Form 10-Q filed
for the period ended September 30, 2001 in Commission File No.
0-1349.)
10 (r)* Amended and Restated Senior Revolving Credit Agreement dated
August 23, 2000 by and between Enesco Group, Inc. and Fleet
National Bank. (Exhibit 10.1 to Form 10-Q filed for the period
ended September 30, 2000 in Commission File No. 0-1349.)
10 (s)* First Amendment to Amended and Restated Senior Revolving
Credit Agreement. (Exhibit u) to Form 10-K filed for the
period ended December 2000 in Commission file No. 0-1349.)
10 (t)* Second Amendment to Amended and Restated Senior Revolving
Credit Agreement. (Exhibit 10(v) to Form 10-K filed for the
period ended December 2000 in Commission File No. 0-1349.)
10 (u)* Third Amendment to Amended and Restated Senior Revolving
Credit Agreement. (Exhibit 10(w) to Form 10-K filed for the
period ended December 2000 in Commission File No. 0-1349.)
10 (v)* Fourth Amendment to Amended and Restated Senior Revolving
Credit Agreement. (Exhibit 10.1 to Form 10-Q filed for the
period ended March 31, 2001 in Commission File No. 0-1349.)
-16-
10 (w)* Daniel DalleMolle Employment Agreement. (Exhibit 10.2 to Form
10-Q filed for the period ended March 31, 2001 in Commission
File No. 0-1349.)
10 (x)* Fifth Amendment to Amended and Restated Senior Revolving
Credit Agreement. (Exhibit 10.1 to Form 10-Q filed for the
period ended June 30, 2001 in Commission File No. 0-1349.)
10 (y)* Borrower Note-LaSalle Bank. (Exhibit 10.2 to Form 10-Q filed
for the period ended June 30, 2001 in Commission File No.
0-1349.)
10 (z)* Back-up L/C and B/A Demand Note - Fleet National Bank.
(Exhibit 10.3 to Form 10-Q filed for the period ended June 30,
2001 in Commission File No. 0-1349.)
10 (aa)* Mortgage, Assignment of Leases and Rents, and Security
Agreement - Fleet National Bank. (Exhibit 10.4 to Form 10-Q
filed for the period ended June 30, 2001 in Commission File
No. 0-1349.)
10 (bb)* Sixth Amendment to Amended and Restated Senior Revolving
Credit Agreement. (Exhibit 10.5 to Form 10-Q filed for the
period ended June 30, 2001 in Commission File No. 0-1349.)
10 (cc)* Seventh Amendment to Amended and Restated Senior Revolving
Credit Agreement. (Exhibit 10.2 to Form 10-Q filed for the
period ended September 30, 2001 in Commission File No.
0-1349.)
10 (dd)* First Amendment to Security Agreement with Fleet National
Bank. (Exhibit 10.3 to Form 10-Q filed for the period ended
September 30, 2001 in Commission File No. 0-1349.)
10 (ee)* Amended and Restated Note - LaSalle Bank National Association.
(Exhibit 10.4 to Form 10-Q filed for the period ended
September 30, 2001 in Commission File No. 0-1349.)
13 Portions of the 2001 Annual Report to the Stockholders of
Enesco Group, Inc.
21 Subsidiaries of Enesco Group, Inc.
23 Consent of Arthur Andersen LLP
24 Power of Attorney
99 Audit by Arthur Andersen LLP
*Incorporated By Reference
-17-