<PAGE> 1
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, 1994 OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from to
------ ------
Commission file number 1-8681
RUSS BERRIE AND COMPANY, INC.
(Exact name of registrant as specified in its charter)
New Jersey 22-1815337
---------------------------------- ----------------------
(State of or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
111 Bauer Drive, Oakland, New Jersey 07436
-------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (201) 337-9000
Securities registered pursuant to Section 12 (b) of the Act:
<TABLE>
<CAPTION>
Name of each exchange
Title of each Class on which registered
------------------- -------------------
<S> <C>
Common Stock, $0.10 stated value New York Stock Exchange
</TABLE>
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, 1995 was $115,442,544.
The number of shares outstanding of each of the Registrant's classes of common
stock, as of March 13, 1995, was as follows:
<TABLE>
<CAPTION>
Class Number of Shares
----- ----------------
<S> <C>
Common Stock, $0.10 stated value 21,519,750
</TABLE>
Documents Incorporated by Reference
Certain portions of the Registrant's Proxy Statement dated March 15, 1995
relating to registrant's Annual Meeting of Shareholders to be held on April 25,
1995 (the "1995 Proxy Statement"), are incorporated by reference into Part III
of this report.
<PAGE> 2
(2)
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 impulse gift and toy items.
The gift products are designed to appeal to the emotions of consumers,
who purchase the products impulsively to reflect their feelings of friendship,
fun, love and affection. The 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.
Two recently acquired toy companies, 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 13 in the Notes to Consolidated Financial Statements.
PRODUCTS
The Company's extensive gift product line of over 10,000 items
(including distinctive variations on basic product designs) encompasses both
seasonal and everyday products that focus on theme or concept groupings such as
Baby, Home Decor, Lifestyles and Collectibles. Individual products include
stuffed animals, picture frames, ceramic mugs, porcelain gifts, figurines,
kitchen magnets, stationery products, and National Football League and Major
League Baseball merchandise. The Company's toy line includes a variety of
innovative toys, novelty candies, and sports related products. Cap Toys Inc.
products include proprietary items such as Stretch Armstrong, Vac-Man, Katie
Kiss 'N' Giggles, and Shout 'N' Shoot. OddzOn Products, Inc. items are marketed
under the brand name Koosh and include products such as Koosh Ball, Koosh
Vortex, Koosh Accessories and Koosh Soft Sport.
Most of the Company's gift products have suggested retail prices between $1
and $30. For example, the suggested retail prices for mugs generally range from
$5 to $8. Toy products generally have suggested retail prices between $3 and
$25.
<PAGE> 3
(3)
The Company markets its gift product line under the trade name "RUSS"
and through its wholly-owned subsidiary, Papel/Freelance, Inc. The Company
markets its product line of toys through two subsidiaries, Cap Toys, Inc. and
OddzOn Products, Inc. The Company's Bright of America, Inc. subsidiary markets
gift products directly to mass merchandisers. In addition, the Company operates
a chain of outlet stores under the name "Russ" and a chain of retail stores,
Fluf N' Stuf, Inc., which sell the Company's products and products of
unaffiliated companies.
The percentages of dollar sales accounted for by business segment
during the periods indicated are as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Gift 67% 95% 100%
Toys* 33% 5% -
</TABLE>
* Includes Cap Toys, Inc., acquired in October 1993 and OddzOn Products, Inc.,
acquired in October 1994.
The Company's toy business has experienced success with its product,
Stretch Armstrong, and related items. During 1994, sales of Stretch Armstrong
and related items accounted for approximately 31% of the Company's toy sales.
Beginning with the third quarter of 1991 through the first quarter of
1993, the Company had experienced success with its product line of Trolls which
were marketed through the Russ Gift division. Net sales of the various products
associated with Trolls accounted for approximately 4%, 33% and 56% of the
Company's gift sales during 1994, 1993 and 1992, respectively.
DESIGN AND PRODUCTION
The Company's gift business has a continuing program of new product
development. The Company designs its own products and then generally evaluates
consumer response through test marketing in selected unaffiliated retail stores
and those operated by Fluf N' Stuf, Inc.Items are added to the product line only
if they can be obtained and marketed on a basis that meets the Company's
profitability standards. 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 quickly.
The Company has more than 190 employees responsible for gift product
development and design in the United States and in the Far East. Generally, a
new design is brought to market in less than nine months after a decision is
made to produce a new product. Sales of the Company's 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.
<PAGE> 4
(4)
The Company engages in market research and test marketing to evaluate
consumer reactions to its gift products. Research into consumer buying trends
often suggest new products. The Company assembles information from retail
stores, including those operated by Fluf N' Stuf, Inc., the Company's 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.
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.
Many popular toy products result in product line extensions enabling
the Company to increase its product line and expand on the marketing success of
these popular products.
Substantially all of the Company's products are produced by independent
manufacturers, generally in the Far East, under close supervision by Company
personnel. During 1994, products accounting for approximately 94% of its gift
products were produced in the Far East and 6% in the United States. During
1994, products accounting for approximately 48% of toy products were produced
outside the United States, primarily in the Far East and 52% in the United
States. Purchases in the United States predominantly represent domestically
produced component parts, packaging and labor costs associated with items
requiring final assembly in the United States.
The Company utilizes approximately 280 manufacturers in the Far East,
primarily in the People's Republic of China, Hong Kong, Taiwan, Korea, Thailand
and Indonesia. During 1994, approximately 68% of the Company's dollar amount of
purchases were attributable to manufacturing in the People's Republic of China.
In December 1994, Congress passed the General Agreement on Tariffs and Trade
(GATT) which eliminates or greatly reduces duty on many of the Company's
imported products. For example, effective January 1, 1995, duty on items
imported from the People's Republic of China classified as "toys" by U.S.
Customs was reduced from 6.8% to zero. This classification includes products
such as stuffed animals and dolls within the gift business as well as the
products associated with the Company's toy business. 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, Thailand and Indonesia monitors the
production process with responsibility for ensuring the quality, safety and
prompt delivery of Company products. Members of the Company's Far East staff
make frequent visits to the manufacturers for
<PAGE> 5
(5)
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 manufacturer will not significantly adversely affect the operations of
the Company. In 1994, the supplier accounting for the greatest dollar volume of
the Company's purchases accounted for approximately 8% of such purchases and the
five largest suppliers accounted for approximately 26% in the aggregate.
MARKETING
The Company's gift products are marketed primarily through its own
direct salesforce of approximately 500 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, book stores,
stationery stores, hospitals, college and airport gift shops, resort and hotel
shops, florists, chain stores and military post exchanges. During 1994, the
Company sold gift products to approximately 75,000 customers. No single gift
customer accounted for more than 1.8% of gift dollar sales.
The Company reinforces the marketing efforts of its salesforce through
an active promotional program, including showrooms, participation in trade
shows, trade advertising and catalogs. In addition, beginning in 1992, the
Company engaged in advertising through consumer publications. These advertising
programs are designed to increase consumer awareness of, and esteem toward, RUSS
products. The amount of consumer advertising related to this program for the
years ended December 31, 1994, 1993 and 1992 were $1,342,000, $4,071,000, and
$10,474,000, respectively.
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 limited 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.
<PAGE> 6
(6)
The Company supports certain of its toy products through an extensive
advertising campaign, which is unrelated to the consumer advertising program
promoting its gift products under the name RUSS. Advertising expense related to
the Company's toy business for the years ended December 31, 1994 and 1993 was
$10,650,000 and $1,883,000, respectively. The majority of its advertising budget
is allocated to television advertising.
The Company's toy business sells its products primarily through
independent representative organizations to mass merchandisers, which represent
a significant portion of its sales. During 1994, approx-imately 24% of the toy
business sales were sold to its largest customer and 58% to its five largest
customers.
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 remainder of the Company's foreign sales, primarily in Japan, Australia,
Italy, Germany, Latin America, Spain and Portugal, are made to distributors for
resale to their customers. 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 $62,342,000, $68,295,000 and $101,471,000 in the years ended December
31, 1994, 1993 and 1992, respectively.
DISTRIBUTION
The Company has customers located throughout 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 and then distributes them to the Company's
customers. The Company also maintains a facility in the Toronto, Canada area for
its Canadian customers and two distribution centers 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 a warehouse distribution facility in Santa Clara,
California.
SEASONALITY
In addition to its everyday gift products, the Company produces
specially designed products for individual seasons during the year, including
Christmas, Valentine's Day, St. Patrick's Day, Easter, Mother's Day, Graduation,
Father's Day, Halloween and Thanksgiving.
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
<PAGE> 7
(7)
September 30, for Valentine's Day in the quarter ended December 31 and for
Easter in the quarter ended March 31.
During 1994, gift items specially designed for individual seasons
accounted for approximately 44% of the Company's gift sales; no individual
season accounted for more than 14% 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 produces items specially designed for the summer
season. Such items include Shout 'N' Shoot and sports related products.
The following table sets forth the Company's quarterly sales by
business segment during 1994, 1993 and 1992.
<TABLE>
<CAPTION>
QUARTERLY SALES
(in millions)
1994 1993 1992
------------ ------------ ------------
Quarter Ended Sales % Sales % Sales %
----- ---- ----- ---- ----- ----
<S> <C> <C> <C> <C> <C> <C>
March 31
Gift $50.9 $96.3 $96.4
Toys* 13.3 - -
----- ----- -----
Consolidated $64.2 23.1 $96.3 34.5 $96.4 21.7
June 30
Gift $36.1 $49.9 $86.3
Toys* 21.4 - -
----- ----- -----
Consolidated $57.5 20.7 $49.9 17.9 $86.3 19.4
September 30
Gift $56.6 $70.7 $152.1
Toys* 26.3 - -
----- ----- -----
Consolidated $82.9 29.8 $70.7 25.3 $152.1 34.2
December 31
Gift $43.8 $49.5 $109.6
Toys* 29.7 12.7 -
----- ----- -----
Consolidated $73.5 26.4 $62.2 22.3 $109.6 24.7
</TABLE>
* Includes Cap Toys, Inc., acquired in October 1993 and OddzOn Products, Inc.,
acquired 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. Commencing late in the second quarter of 1991, net sales of
the Company were favorably impacted by the success of products associated with
the Troll product line which continued into the first quarter of 1993.
<PAGE> 8
(8)
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, 1994 was $30,340,000 and at December 31, 1993 was $32,546,000.
COMPETITION
The gift and toy industries are highly competitive and certain of the
Company's existing or potential competitors may have financial resources that
are substantially greater than those of the Company. 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., Ganz Bros., Ty, Inc.,
Applause, Inc., Dakin Inc., American Greetings, Hallmark, Recycled Paper
Products, Enesco and numerous small suppliers. The Company's principal toy
competitors are Bandai, Toy Biz, Tyco, Mattel and Hasbro Inc.
COPYRIGHTS, TRADEMARKS, PATENTS AND LICENSES
The Company prints notices of claim of copyright on substantially all
of its products and has registered hundreds of its designs with the United
States Copyright Office. It also has registered, in the United States and
certain foreign countries, the trademark "RUSS" with a distinctive design, which
it utilizes on most of its 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 to market gift
products compatible with its product line. Examples of licensed products include
designs of the National Football League and Major League Baseball. Licensed
products represented approximately 7% of the Company's gift dollar sales in 1994
and 10% in 1993. During 1994, no single gift business license accounted for more
than 2% of gift dollar sales.
The Company's toy products are most often developed in conjunction with
independent toy inventors and, as such, license agreements exist for the
majority of the toy product line. Products are also developed around popular
characters and additional license agreements exist.
<PAGE> 9
(9)
EMPLOYEES
As of January 31, 1995, the Company employed approximately 1,850
persons on a full-time basis. The Company considers its employee relations to be
good; substantially all of the Company's employees are not covered by a
collective bargaining agreement. The Company's policy is to require that its
management, sales and product development and design personnel enter into
contracts in which they agree not to disclose confidential information
concerning the Company and, in the case of management and sales personnel, not
to compete with the Company(subject to certain territorial limitations in the
case of salespersons) for a period of six months after termination of their
employment.
GOVERNMENT REGULATION
Certain of the Company's products are subject to the provisions of,
among other laws, the Federal Hazardous Substances Act and the Federal Consumer
Product Safety Act. Those laws empower the Consumer Product Safety Commission to
protect children from certain hazardous articles by excluding them from the
market and requiring a manufacturer to repurchase articles which become banned.
The Commission's determination is subject to judicial review. Similar laws exist
in some states and cities in the United States and in Canada and Europe. The
Company maintains a quality control program to ensure compliance with applicable
laws.
ITEM 2. PROPERTIES
The Company's principal facilities consist of its corporate offices in
Oakland, New Jersey, and 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 a warehouse
distribution facility in Santa Clara, California. The Company owns the facility
used by Bright of America, Inc. in Summersville, West Virginia, one of its
facilities in Southampton, England and most of the office space it uses in Hong
Kong. The Company leases its other facilities. The facilities of the Company are
maintained in good operating condition, are generally adequate for the Company's
purposes and, except for the Dayton, New Jersey and Lakeland, Florida
facilities, which were closed as part of restructuring of the Company's
distribution system, are generally fully utilized.
<PAGE> 10
(10)
THE COMPANY'S CURRENT PRINCIPAL FACILITIES ARE AS FOLLOWS:
<TABLE>
<CAPTION>
Lease Expiration
Location - Domestic Sq. Ft. Area (if applicable) (1)
------------------------------------ ------------ -------------------
<S> <C> <C>
Petaluma, California (2)(3)......... 234,200 June 30, 2004
Oakland, New Jersey (2)(4).......... 120,000 April 1, 2004
South Brunswick, New Jersey (2)(3)
(6)(7).............................. 513,680 May 31, 1999
Reynoldsburg, Ohio (3).............. 77,600 July 1, 1997
Collegeville, Pennsylvania (6)...... 10,835 December 31, 1995
Lakeland, Florida (2)(8)............ 42,500 February 28, 1998
Dayton, New Jersey (5)(8)........... 160,409 October 31, 1997
Summersville, West Virginia (6)(7).. 156,000 Not applicable -
Owned by Company
Bedford Hts., Ohio (6)(7)........... 98,604 January 31, 2000
Campbell, California (6)............ 8,248 June 30, 1995
Santa Clara, California (7)......... 29,750 July 30, 1995
Lease Expiration
Location - Foreign Sq. Ft. Area (if applicable)(1)
------------------------------------ ------------ ------------------
Chandlers Ford, England (6)......... 10,846 December 24, 2014
Southampton, England (7)............ 60,750 March 24, 2003
Southampton, England (7)............ 51,000 Not applicable -
Owned by Company
Rexdale, Ontario, Canada (6)(7)..... 76,290 May 31, 1997
Rexdale, Ontario, Canada (8)........ 31,453 May 31, 1997
Hong Kong (6)....................... 25,600 Not applicable -
Owned by Company
</TABLE>
(1) Not including renewal options.
(2) Properties owned directly or indirectly by Russell Berrie or members of
his immediate family. See ITEM 13 - "CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS".
(3) Regional distribution center.
(4) Corporate headquarters.
(5) Property leased from a partnership of which a director of the Company is a
general partner. See ITEM 13 - "CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS".
(6) Subsidiary (or division) headquarters.
(7) Subsidiary (or division) distribution center.
(8) Facility closed in connection with a restructuring undertaken by the
Company. The Company has subleased the Lakeland facility, and continues
its efforts to sublease or otherwise terminate the lease with regard to
the Dayton and Rexdale Facilities.
In addition, the Company leases an aggregate of approximately 24,375
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 ten years.
<PAGE> 11
(11)
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 47,000 square feet. The remaining lease terms at these
facilities range between two and eight years.
ITEM 3. LEGAL PROCEEDINGS
In the ordinary course of its business, the Company is party to
various copyright, patent and trademark infringement, unfair competition, breach
of contract, customs, employment and other legal actions, as plaintiff or
defendant.
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 14 of the Notes to Consolidated Financial
Statements).
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
<PAGE> 12
(12)
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The following table provides information with respect to the
executive officers of the Company. All officers are elected by the Board of
Directors and may be removed with or without cause by the Board.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
----------------------- --- -------------------------------
<S> <C> <C>
Russell Berrie ........ 62 Chairman of the Board, Chief
Executive Officer and Director
Arnold S. Bloom........ 52 Vice President, Secretary and
General Counsel
Paul Cargotch.......... 50 Vice President - Finance and
Chief Financial Officer
A. Curts Cooke......... 58 President, Chief Operating
Officer and Director
Jimmy Hsu.............. 45 Executive Vice President
and Director
Y.B. Lee............... 49 Vice President - Far East
Plush Division
Guy M. Lombardo........ 50 Vice President - Administration
and Information Systems
Bernard Tenenbaum...... 40 Vice President - Corporate
Development
</TABLE>
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
and General Counsel since January 1988 and as Secretary since March 1990.
Paul Cargotch has been employed by the Company as Chief Financial
Officer since March 1990 and Vice President - Finance for more than the past
five years.
<PAGE> 13
(13)
A. Curts Cooke has been employed as President and Chief Operating
Officer of the Company since March 17, 1990; Executive Vice President of the
Company, from December 1984 and Chief Financial Officer and Secretary of the
Company from 1984 until March 17, 1990. Mr. Cooke has served as a director of
the Company since 1982.
Jimmy Hsu has been employed by the Company as Executive Vice
President of the Company since July 1, 1994. Prior to that, Mr. Hsu's titles
were Senior Vice President - Product Development and Far East Operations since
August 1991 and Senior Vice President - Far East Operations from January 1987
through July 1991.
Y.B. Lee has been employed by the Company as either Managing
Director or President - Korean Operations from 1977 to February 1990, when he
was elected Vice President - Far East Plush Division.
Guy M. Lombardo has been employed by the Company as Vice President -
Administration and Information Systems since January 1994; and prior to that,
was Vice President-Management Information Systems for more than the past five
years.
Bernard Tenenbaum has been employed by the Company as Vice
President - Corporate Development since January 14, 1993; he also
serves as President and Chief Executive Officer of a division of the Company
which focuses on evaluating possible acquisitions for the Company and
overseeing the management of the Company's toy subsidiaries. From September
1988 until joining the Company as an officer, Mr. Tenenbaum was a founding
Director of the George Rothman Institute of Entrepreneurial Studies, Fairleigh
Dickenson University, and was previously Associate Director of the Snider
Entrepreneurial Center of the Wharton School.
<PAGE> 14
(14)
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
At December 31, 1994 the Company's Common Stock was held by
approximately 817 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:
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
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
1993
----
First Quarter..................... $19 7/8 $14
Second Quarter.................... 17 13 1/8
Third Quarter..................... 15 1/2 12 3/8
Fourth Quarter.................... 16 5/8 12 7/8
</TABLE>
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.
<PAGE> 15
(15)
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
FOR YEARS ENDED DECEMBER 31,
(Dollars in Thousands, Except Per Share Data)
1994 1993 1992 1991 1990 1989
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Net Sales $278,105 $279,111 $444,382 $267,859 $250,579 $246,373
Cost of Sales 143,867 125,923 176,265 109,857 105,443 105,897
Income Before
Income Taxes * 7,024 17,573 92,999 31,746 23,239 13,745
Provision for
Income Taxes 1,697 4,391 32,651 9,704 5,817 3,961
Net Income 5,327 13,182 60,348 22,042 17,422 9,784
Net Income Per Share .25 .61 2.70 .98 .77 .43
Dividends Per Share .60 .60 .47 .40 .70** .27
BALANCE SHEET
Working Capital $152,454 $178,001 $206,510 $166,538 $154,841 $162,822
Property, Plant and
Equipment 25,298 28,133 29,577 27,035 34,010 21,277
Total Assets 254,826 259,115 298,847 226,319 216,459 217,106
Long-Term Debt - - - 3,000 4,492 2,689
Shareholders' Equity 218,388 224,034 241,259 196,278 188,380 185,519
STATISTICAL
Effective Income
Tax Rate 24.2% 25.0% 35.1% 30.6% 25.0% 28.8%
Current Ratio 5.2 6.1 4.6 7.2 7.6 6.6
Return on Average
Shareholders' Equity 2.4% 5.7% 27.6% 11.5% 9.3% 5.3%
Net Profit Margin 1.9% 4.7% 13.6% 8.2% 7.0% 4.0%
Number of Employees 1,919 2,126 2,608 2,333 2,569 2,258
</TABLE>
* Includes a restructuring charge of $5.0 million in 1993 and $9.5 million
in 1989.
** Includes special dividend of $.40 per share.
<PAGE> 16
(16)
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
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 of 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).
<PAGE> 17
(17)
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.
RESULTS OF OPERATIONS - YEARS ENDED DECEMBER 31, 1993 AND 1992
For the year ended December 31, 1993 the Company's net sales of
$279,111,000 represents a decrease of $165,271,000 or 37.2% compared to the year
ended December 31, 1992. This decrease can be attributed to the significant
reduction in net sales of the Company's Troll product line. During 1993 net
sales of the products associated with the Troll product line were approximately
$86,700,000 or 31.1% of consolidated net sales compared to approximately
$250,000,000 or 56.3% of consolidated net sales during 1992. In addition, the
Company believes that its customers had experienced a general softness in their
business as a result of the growth of mass merchandisers, factory outlet malls
and warehouse clubs. Included in the results for the year ended December 31,
1993 are the net sales of $12,653,000 achieved by Cap Toys, Inc., since its
acquisition in October 1993.
Cost of sales was 45.1% of net sales in 1993 compared to 39.7% of net
sales in 1992. This increase can be attributed to the higher gross profit
margins on sales of Troll products during 1992. In addition, certain components
of cost of sales are fixed costs, primarily costs associated with the sourcing
of product in the Far East and provisions for slow moving inventory, which were
absorbed by the higher sales volume in 1992. Also contributing to the increase
are the effects of the reduction of the selling price of certain of the
Company's products in August 1993.
Selling, general and administrative expense was $133,188,000 for the
year ended December 31, 1993 compared to $170,948,000 in 1992, a decrease of
$37,760,000 or 22.1%. This decrease can be primarily attributed to a decrease in
the expenses required to support lower sales levels, principally salesforce
commissions (approximately $30,750,000), and to lower expenses related to the
Company's consumer advertising program (approximately $6,200,000).
<PAGE> 18
(18)
Included in the results of operations in 1993 is a restructuring
charge of $5,000,000 representing the write-down of certain assets, employee
severance costs and other costs related to the closing and consolidating of
distribution centers and administrative functions. Also included are additional
provisions for future lease obligations relating to a previously closed
facility. The restructuring charge resulted in an after tax effect on net income
of $3,150,000 or $.15 per share. As expected, this restructuring, in addition to
a reduction in the salesforce, resulted in an annualized savings in selling,
general and administrative expense of approximately $10,000,000.
The provision for income taxes as a percentage of income before taxes
decreased to 25.0% in 1993 compared to 35.1% in 1992. The lower effective rate
can be attributed to an increased relative benefit associated with investment
income resulting from tax- advantaged investments within the Company's
short-term investment portfolio, an increased proportion of income before income
taxes related to certain foreign subsidiaries with lower tax provisions and to
an increased relative benefit for deductions permitted on contribution to
charitable organizations.
Net income of $13,182,000 for 1993 decreased by $47,166,000 when
compared to 1992. The decrease in net income can be attributed to the decrease
in net sales, partially offset by the decrease in selling, general and
administrative expense.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1994 the Company had cash and cash equivalents and
short-term investments of $47,961,000 compared to $82,899,000 at December 31,
1993.
During the year ended December 31, 1994, the Company generated net cash
flows from operating activities of $787,000. In 1994 funds of $23,709,000 were
used for the acquisition of OddzOn Products, Inc., which was acquired in
October, 1994. Funds were also used for the payment of dividends amounting to
$12,874,000.
The Company has available $88,089,000 in bank lines of credit that
provide for direct borrowings and letters of credit used for the purchase of
inventory. At December 31, 1994 letters of credit of $29,894,000 were
outstanding. There were no direct borrowings under the bank lines of credit.
Working capital requirements during 1994 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.
<PAGE> 19
(19)
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 as of December 31, 1994 and 1993, and
the related consolidated statements of income, shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 1994. 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, 1994 and 1993, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1994 in conformity with
generally accepted accounting principles.
As discussed in Note 1 to the Consolidated Financial Statements,
effective January 1, 1992 the Company changed its method of accounting for
income taxes.
COOPERS & LYBRAND L.L.P.
Parsippany, New Jersey
February 3, 1995
<PAGE> 20
(20)
CONSOLIDATED STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Net sales ................................... $278,105 $279,111 $444,382
Cost of sales................................ 143,867 125,923 176,265
-------- -------- --------
GROSS PROFIT.............................. 134,238 153,188 268,117
Selling, general and administrative expense.. 129,645 133,188 170,948
Litigation................................... - - 6,300
Restructuring charge......................... - 5,000 -
Investment and other income - net ........... 2,431 2,573 2,130
-------- -------- --------
INCOME BEFORE INCOME TAXES................ 7,024 17,573 92,999
Provision for income taxes................... 1,697 4,391 32,651
-------- -------- --------
NET INCOME................................ $ 5,327 $ 13,182 $ 60,348
======== ======== ========
NET INCOME PER SHARE......................... $ .25 $ .61 $ 2.70
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE> 21
(21)
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(Dollars in Thousands)
<TABLE>
<CAPTION>
ADDITIONAL FOREIGN
COMMON PAID RETAINED CURRENCY TREASURY
STOCK IN CAPITAL EARNINGS TRANSLATION STOCK
------ ---------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1991..... $2,266 $21,095 $175,421 $3,070 $ (5,574)
Net income....................... - - 60,348 - -
Share transactions under
stock option plans............. 82 10,282 - - -
Cash dividends ($.47 per share).. - - (10,504) - -
Foreign currency
translation adjustment......... - - - (5,158) -
Transactions in treasury shares.. - - - - (10,069)
------ ------- -------- ------- --------
BALANCE AT DECEMBER 31, 1992..... 2,348 31,377 225,265 (2,088) (15,643)
Net income....................... - - 13,182 - -
Share transactions under
stock option plans............. 40 5,463 - - -
Cash dividends ($.60 per share).. - - (12,797) - -
Foreign currency
translation adjustment......... - - - (899) -
Transactions in treasury shares.. - - - - (22,214)
------ ------- -------- ------- --------
BALANCE AT DECEMBER 31, 1993..... 2,388 36,840 225,650 (2,987) (37,857)
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)
====== ======= ======== ======= ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE> 22
(22)
CONSOLIDATED BALANCE SHEET
AT DECEMBER 31,
(Dollars in Thousands)
<TABLE>
<CAPTION>
1994 1993
-------- --------
ASSETS
<S> <C> <C>
Current assets
Cash and cash equivalents.................... $ 42,758 $ 51,478
Short-term investments....................... 5,203 31,421
Accounts receivable, trade, less allowances;
$5,651 in 1994 and $3,830 in 1993 .......... 55,474 46,899
Inventories.................................. 67,052 66,110
Prepaid expenses and other current assets.... 4,229 5,005
Deferred income taxes........................ 14,176 12,169
-------- --------
TOTAL CURRENT ASSETS................. 188,892 213,082
Property, plant and equipment - net............ 25,298 28,133
Goodwill and other intangible assets - net..... 35,913 16,420
Other assets................................... 4,723 1,480
-------- --------
TOTAL ASSETS......................... $254,826 $259,115
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable............................. $ 6,972 $ 5,235
Accrued expenses............................. 24,795 23,171
Accrued restructuring costs.................. 4,527 6,283
Accrued income taxes......................... 144 392
-------- --------
TOTAL CURRENT LIABILITIES............ 36,438 35,081
Shareholders' equity
Common stock: $.10 stated value; authorized
50,000,000 shares; issued 1994, 23,953,530
shares; 1993, 23,876,274 shares............ 2,395 2,388
Additional paid in capital................... 37,875 36,840
Retained earnings............................ 218,103 225,650
Foreign currency translation adjustments..... (2,128) (2,987)
Treasury stock, at cost (2,454,813 shares)... (37,857) (37,857)
-------- --------
TOTAL SHAREHOLDERS' EQUITY........... 218,388 224,034
-------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY................. $254,826 $259,115
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE> 23
(23)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31
(Dollars in Thousands)
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,327 $13,182 $60,348
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation................................ 4,549 5,172 5,525
Amortization of intangible assets........... 2,483 1,193 1,067
Provision for accounts receivable reserves.. 5,581 2,198 4,973
Gains or losses from sale or disposal
of fixed assets........................... (353) (203) 570
Changes in assets and liabilities
Accounts receivable....................... (14,156) 34,509 (17,598)
Inventories............................... 3,263 17,207 (19,377)
Deferred income taxes..................... (2,007) (1,573) (2,597)
Prepaid expenses and other current assets. 942 (912) 842
Goodwill and other intangible assets...... (2,610) (205) (418)
Other assets.............................. (3,139) 87 (165)
Accounts payable.......................... 1,737 (1,620) 2,013
Accrued expenses.......................... 1,174 (10,495) 19,023
Accrued restructuring costs............... (1,755) 2,823 1,924
Accrued income taxes...................... (249) (10,886) 7,325
------- ------- -------
Total adjustments....................... (4,540) 37,295 3,107
------- ------- -------
Net cash provided by
operating activities.................. 787 50,477 63,455
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (increase) in short-term investments. 26,218 (979) (30,442)
Proceeds from sale of fixed assets............ 1,362 1,928 314
Capital expenditures.......................... (2,405) (5,190) (10,130)
Acquisitions.................................. (23,709) (24,175) -
------- ------- -------
Net cash provided by (used in)
investing activities.................. 1,466 (28,416) (40,258)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of long-term debt.................... - (3,000) (1,000)
Issuance of common stock...................... 1,042 5,503 10,364
Dividends..................................... (12,874) (12,797) (10,504)
Transactions in treasury shares............... - (22,214) (10,069)
------- ------- -------
Net cash (used in) financing
activities............................ (11,832) (32,508) (11,209)
Effect of exchange rate....................... 859 (360) (1,090)
------- ------- -------
Net increase (decrease) in cash and
cash equivalents.............................. (8,720) (10,807) 10,898
Cash and cash equivalents at beginning of year.. 51,478 62,285 51,387
------- ------- -------
Cash and cash equivalents at end of year........ $42,758 $51,478 $62,285
======= ======= =======
CASH PAID DURING THE YEAR FOR:
Interest.................................... $ 353 $ 531 $ 392
Income taxes................................ $ 3,953 $16,851 $28,674
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE> 24
(24)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES:
PRINCIPALS OF CONSOLIDATION
The consolidated financial statements include the accounts of Russ
Berrie and Company, Inc. and its wholly-owned subsidiaries (collectively, the
"Company") after elimination of intercompany accounts and transactions.
ADVERTISING COSTS
Production costs for advertising are charged to operations in the year
the related advertising campaign begins. All other advertising costs are charged
to results of operations during the year in which they are incurred.
CASH EQUIVALENTS
Cash equivalents consist of investments in interest bearing accounts
and highly liquid securities having a maturity of three months or less.
SHORT-TERM INVESTMENTS
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.
As of December 31, 1993 short-term investments were stated at cost plus accrued
interest which approximates market.
INVENTORIES
Inventories, which mainly consist of finished goods, are stated at the
lower of cost (first-in, first-out) or market value.
PROPERTY
Property, plant and equipment are stated at cost and are depreciated
using the straight-line method over their estimated useful lives which
range from three to eighteen years. Leasehold improvements are amortized using
the straight-line method over the term of the respective lease or asset life,
whichever is shorter. Expenditures for maintenance and repairs are charged to
operations as incurred. Gain or loss on retirement or disposal of individual
assets is recorded as income or expense.
<PAGE> 25
(25)
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 two to six years. Accumulated
amortization was $6,366,000 and $3,876,000 at December 31, 1994 and 1993,
respectively.
FOREIGN CURRENCY TRANSLATION
Aggregate foreign exchange gains or losses resulting from the
translation of those foreign currency financial statements which are denominated
in the local currency of each foreign subsidiary are recorded as a separate
component of shareholders' equity. Gains and losses from foreign currency
transactions are included in investment and other income - net.
ACCOUNTING FOR INCOME TAXES
For the year ended December 31, 1992 the Company adopted the provisions
of Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes".
NET INCOME PER SHARE
Net income per share is based on the weighted average number of shares
outstanding during the year. The number of shares used in the computation at
December 31, 1994, 1993 and 1992 were 21,458,099; 21,470,672; and 22,391,739,
respectively.
POST-EMPLOYMENT BENEFITS
In November 1992, Statement of Financial Accounting Standards No. 112
was issued which establishes the method of accounting for post-employment
benefits. The Company does not offer any post-employment benefits to employees
and, as such, there is no impact of this statement on the consolidated financial
statements.
<PAGE> 26
(26)
FOREIGN CURRENCY CONTRACTS
The Company enters into forward exchange contracts and currency
options, principally to hedge the purchase of inventory by its foreign
subsidiaries. Gains and losses are reported as a component of the related
transactions. The Company does not speculate in foreign currencies. At December
31, 1994 and 1993 the aggregate amount of foreign exchange contracts was
$1,500,000 and $1,000,000, respectively.
ACQUISITION
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. Amounts related to additional
payments will be accrued and charged to goodwill when they become earned.
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 year ended December 31, 1994, $2,563,000 was charged to goodwill
related to these additional payments.
NOTE 2 - SHORT-TERM INVESTMENTS
Short-term investments as of December 31, 1994 and December 31, 1993 include the
following:
<TABLE>
<CAPTION>
December 31,
1994 1993
--------------------- ------------------------
Cost Fair Value Cost Fair Value
--------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
U.S. government
securities........... - - $ 7,043,000 $ 7,139,000
Tax exempt
municipal bonds...... $5,268,000 $5,203,000 21,326,000 21,480,000
Corporate debt
securities........... - - 2,764,000 2,802,000
---------- ---------- ----------- -----------
$5,268,000 $5,203,000 $31,133,000 $31,421,000
========== ========== =========== ===========
</TABLE>
The maturities of short-term investments as of December 31, 1994 are due after
one year and before five years.
<PAGE> 27
(27)
NOTE 3 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1994 1993
----------- ------------
<S> <C> <C>
Land............................ $ 6,071,000 $ 6,068,000
Buildings....................... 10,607,000 11,033,000
Machinery and equipment......... 21,899,000 22,152,000
Furniture and fixtures.......... 6,197,000 6,022,000
Leasehold improvements.......... 7,766,000 8,413,000
----------- -----------
52,540,000 53,688,000
Less, Accumulated depreciation
and amortization............... 27,242,000 25,555,000
----------- -----------
$25,298,000 $28,133,000
=========== ===========
</TABLE>
NOTE 4 - LINES OF CREDIT
Under its existing domestic bank lines of credit, the Company has available
$75,000,000 of direct borrowings and letters of credit at any one time.
The maximum amount available to the Company's foreign operations at
December 31, 1994 under local lines of credit is $13,089,000. 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, 1994 had letters of credit outstanding of $29,894,000.
NOTE 5 - ACCRUED EXPENSES
Accrued expenses at December 31, 1994 and 1993 include accrued sales
commissions of $1,625,000 and $2,110,000, respectively. At December 31, 1994
accrued expenses include accrued advertising of $2,653,000 and an accrual of
$2,349,000 related to additional payments required pursuant to the asset
purchase agreement with Cap Toys, Inc. Accrued expenses at December 31, 1994 and
1993 also include accrued litigation of $6,300,000 (see Note 14).
NOTE 6 - 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,
1994 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 9).
<PAGE> 28
(28)
NOTE 7 - INVESTMENT AND OTHER INCOME - NET
The significant components of investment and other income - net for the
years ended December 31, 1994, 1993, and 1992 are shown as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Investment income............... $2,214,000 $3,033,000 $2,647,000
Interest expense................ (244,000) (617,000) (470,000)
Foreign currency transactions... (87,000) (583,000) (582,000)
Other........................... 548,000 740,000 535,000
---------- ---------- ----------
$2,431,000 $2,573,000 $2,130,000
========== ========== ==========
</TABLE>
NOTE 8 - INCOME TAXES
The Company and its domestic subsidiaries file a consolidated Federal
income tax return.
Income before income taxes was:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
United States........... $ 4,225,000 $ 7,140,000 $60,039,000
Foreign................. 2,799,000 10,433,000 32,960,000
----------- ----------- -----------
$ 7,024,000 $17,573,000 $92,999,000
=========== =========== ===========
</TABLE>
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
CURRENTLY PAYABLE:
Federal................. $ 2,348,000 $ 2,785,000 $22,614,000
Foreign................. 544,000 2,653,000 9,318,000
State................... 812,000 526,000 3,316,000
----------- ----------- -----------
$ 3,704,000 5,964,000 35,248,000
DEFERRED:
Federal................. (3,023,000) (1,572,000) (2,313,000)
Foreign................. (342,000) (30,000) 92,000
State................... 1,358,000 29,000 (376,000)
----------- ----------- -----------
(2,007,000) (1,573,000) (2,597,000)
----------- ----------- -----------
$ 1,697,000 $ 4,391,000 $32,651,000
=========== =========== ===========
</TABLE>
<PAGE> 29
(29)
A reconciliation of the provision for income taxes with amounts computed at the
statutory Federal rate is shown below:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Tax at U.S. Federal statutory rate.... $ 2,458,00 $ 6,151,000 $31,620,000
State income tax net of Federal
tax benefit......................... 287,000 342,000 2,188,000
Foreign rate differences.............. 242,000 (1,029,000) (1,797,000)
Charitable contributions.............. - (901,000) (1,246,000)
Tax advantaged investment income...... (301,000) (561,000) (540,000)
Provision for foreign dividends....... (3,000,000) 1,200,000 1,800,000
Change in enacted rates............... (52,000) (414,000) -
Change in valuation allowance......... 1,275,000 750,000 -
Adjustment of estimated liabilities 707,000 - -
Other, net............................ 81,000 (1,147,000) 626,000
----------- ----------- -----------
$ 1,697,000 $ 4,391,000 $32,651,000
=========== =========== ===========
</TABLE>
The components of the net deferred tax asset, net of a valuation allowance
of $2,025,000 (primarily relating to deferred state taxes), resulting from
differences between accounting for financial reporting purposes and accounting
for tax purposes were as follows:
<TABLE>
<CAPTION>
December 31,
------------------------
1994 1993
----------- -----------
<S> <C> <C>
ASSETS:
Inventory capitalization................ $ 2,174,000 $ 2,940,000
Reserves not deducted for tax purposes.. 6,533,000 5,440,000
Accrued restructuring costs............. 1,695,000 2,345,000
Litigation.............................. 2,145,000 2,856,000
Charitable contribution carryforward.... 1,270,000 1,624,000
Other................................... 681,000 432,000
----------- -----------
14,498,000 15,637,000
LIABILITIES:
Depreciation............................ 259,000 468,000
Other................................... 63,000 -
Unremitted earnings of foreign
subsidiaries........................... - 3,000,000
----------- -----------
322,000 3,468,000
----------- -----------
Net deferred tax asset.................. $14,176,000 $12,169,000
=========== ===========
</TABLE>
U.S. income taxes or foreign withholding taxes are not provided on
undistributed earnings of foreign subsidiaries, which are considered to be
permanently reinvested. The amount of such earnings was approximately
$58,566,000 as of December 31, 1994. Determination of the net amount of
unrecognized deferred tax liability with respect to these earnings is not
practicable.
<PAGE> 30
(30)
NOTE 9 - RELATED PARTY TRANSACTIONS
Certain buildings, referred to in Note 10, 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, 1994, 1993 and 1992
were $4,307,000, $4,406,000 and $4,133,000, respectively. The Company is also a
guarantor under two mortgages for property so leased with a principal amount
aggregating approximately $8,373,000 as of December 31, 1994, $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, 1994, 1993, and 1992 were $996,000, $996,000
and $831,000, respectively. This facility is included in the estimate for future
lease obligations with respect to the accrued restructuring costs (see Note 6).
NOTE 10 - LEASES
At December 31, 1994, 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-four years.
Rent expense for the years ended December 31, 1994, 1993 and 1992, amounted
to $8,264,000, $8,456,000 and $8,167,000, respectively.
The approximate aggregate future rental payments as of December 31, 1994
under operating leases are as follows:
<TABLE>
<S> <C>
1995............................ $ 8,896,000
1996............................ 8,175,000
1997............................ 7,614,000
1998............................ 6,243,000
1999............................ 4,379,000
Later years..................... 12,872,000
</TABLE>
NOTE 11 - STOCK OPTION AND EMPLOYEE STOCK PURCHASE PLANS
The Company has three stock option plans and an employee stock purchase
plan. As of December 31, 1994 and January 1, 1994 there were 3,533,713 and
3,800,000 shares of common stock, respectively, 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 stock as
of the date the option is granted and no options may be exercised within one
year from the date of grant.
<PAGE> 31
(31)
Options are exercisable at prices ranging from $9.34 to $21.17 per
share under the various plans. The exercise price of options exercised during
1994 ranged from $9.34 to $14.25. Summarized stock option data follows:
<TABLE>
<CAPTION>
Stock Stock
Option Option
And Plans For
Stock Restricted Outside
Option Plans Stock Plans* Directors*
------------ ------------ ----------
<S> <C> <C> <C>
Outstanding as of
December 31, 1991... 1,280,274 159,654 60,000
Granted during the year.... 318,338 43,229 15,000
Exercised during the year.. (693,162) (63,909) (15,000)
Cancelled during the year.. (41,573) - -
Surrendered upon exercise
of SARs............. - (31,871) (3,000)
--------- ------- -------
Outstanding as of
December 31, 1992 863,877 107,103 57,000
Granted during the year ... 455,453 30,391 15,000
Exercised during the year.. (285,729) (51,592) -
Cancelled during the year.. (101,481) - -
--------- ------- -------
Outstanding as of
December 31, 1993 932,120 85,902 72,000
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
========= ======= =======
</TABLE>
* These plans allowed for the granting of Stock Appreciation Rights (SARs). The
SARs, which relate to specific options under the plans, permit the participant
to exercise the SAR and be entitled to an amount equal to the excess of the
closing market price of Russ Berrie and Company, Inc. Common Stock on the date
of exercise over the exercise price of the related option.
Under the Employee Stock Purchase Plan, the option price is 90% of the
closing market price of the stock on the first business day of the plan year.
During 1994, 4,981 shares were acquired under this plan. The 1994 Employee Stock
Purchase Plan has 145,019 shares reserved for future issuance.
NOTE 12 - RETIREMENT PLAN AND 401(K) PLAN
As of December 31, 1994, the Company had a non-contributory retirement plan
for substantially all employees which provides for contributions by the Company,
on a calendar year basis, in such amounts (subject to certain maximum
limitations) as the Board of Directors may determine.
<PAGE> 32
(32)
There were no provisions for contributions charged to operations for the
year ended December 31, 1994. The provisions for contributions charged to
operations for the years ended December 31, 1993 and 1992 were $1,991,000 and
$2,384,000, respectively. Effective February 1, 1995, the Company converted its
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.
NOTE 13 - BUSINESS SEGMENTS AND GEOGRAPHIC AREAS
The Company's operations by business segment and geographic area are
presented below:
<TABLE>
<CAPTION>
Financial data by business segment
----------------------------------
1994 1993
------------ ------------
<S> <C> <C>
REVENUES:
Gift.............................. $187,388,000 $266,458,000
Toys.............................. 90,717,000 12,653,000
------------ ------------
Consolidated...................... $278,105,000 $279,111,000
============ ============
OPERATING INCOME:
Gift.............................. $ 1,401,000 $ 26,739,000
Toys.............................. 12,277,000 977,000
Corporate expense
and investment income............ (6,654,000) (10,143,000)
------------ ------------
Consolidated...................... $ 7,024,000 $ 17,573,000
============ ============
IDENTIFIABLE ASSETS:
Gift* ............................ $183,869,000 $232,905,000
Toys.............................. 70,957,000 26,210,000
------------ ------------
Consolidated...................... $254,826,000 $259,115,000
============ ============
DEPRECIATION AND AMORTIZATION:
Gift.............................. $ 5,297,000 $ 6,073,000
Toys.............................. 1,735,000 292,000
------------ ------------
Consolidated...................... $ 7,032,000 $ 6,365,000
============ ============
CAPITAL EXPENDITURES:
Gift.............................. $ 1,870,000 $ 5,109,000
Toys.............................. 854,000 478,000
------------ ------------
Consolidated...................... $ 2,724,000 $ 5,587,000
============ ============
</TABLE>
*Includes short-term investments.
<PAGE> 33
(33)
<TABLE>
<CAPTION>
Financial data by geographic area
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES:
United States........... $228,833,000 $213,101,000 $344,952,000
Europe.................. 23,024,000 33,230,000 52,831,000
Other Foreign........... 26,248,000 32,780,000 46,599,000
------------ ------------ ------------
Consolidated............ $278,105,000 $279,111,000 $444,382,000
============ ============ ============
NET INCOME:
United States........... $ 2,730,000 $ 5,372,000 $36,798,000
Europe.................. (719,000) 2,434,000 9,696,000
Other Foreign........... 3,316,000 5,376,000 13,854,000
------------ ------------ ------------
Consolidated............ $ 5,327,000 $13,182,000 $60,348,000
============ ============ ============
IDENTIFIABLE ASSETS:
United States........... $189,731,000 $189,385,000 $218,571,000
Europe.................. 29,119,000 30,877,000 38,507,000
Other Foreign........... 35,976,000 38,853,000 41,769,000
------------ ------------ ------------
Consolidated............ $254,826,000 $259,115,000 $298,847,000
============ ============ ============
</TABLE>
NOTE 14 - 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.
<PAGE> 34
(34)
NOTE 15 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following selected financial data for the eight quarters ended December
31, 1994 are derived from unaudited financial statements and include, in the
opinion of management, all adjustments necessary for fair presentation of the
results for the interim periods presented and are of a normal recurring nature.
However, the quarter ended December 31, 1993 includes a restructuring charge of
$5,000,000 ($3,150,000 or $.15 per share after taxes) and a provision for slow
moving inventory of $4,380,000 ($2,760,000 or $.13 per share after taxes):
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
FOR QUARTERS ENDED
-----------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
---------- --------- --------- ---------
<S> <C> <C> <C> <C>
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
1993
Net sales............ $ 96,310 $ 49,887 $ 70,738 $ 62,176
Gross profit......... 58,575 27,099 40,459 27,055
Net income (loss).... 13,634 (3,001) 6,322 (3,773)
Net income (loss)
per share........... $ 0.62 $ (0.14) $ 0.30 $ (0.18)
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
<PAGE> 35
(35)
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 1995 Proxy Statement, which is
incorporated herein by reference and under the caption "EXECUTIVE OFFICERS OF
THE REGISTRANT" on pages 12 and 13 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 1995 Proxy Statement,
which are incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
Information relating to this item appears under the captions "SECURITY
OWNERSHIP OF MANAGEMENT" and "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS"
on pages 9 and 10 of the 1995 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 14 and 15
and "COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION" on page 7 of
the 1995 Proxy Statement, which is incorporated herein by reference.
<PAGE> 36
(36)
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:
<TABLE>
<CAPTION>
Page Number
in this
Report
-----------
<S> <C>
Report of Independent Accountants............. 19
Consolidated Statement of Income for the
years ended December 31, 1994, 1993 and 1992.. 20
Consolidated Statement of Changes in
Shareholders' Equity for the years ended
1994, 1993 and 1992........................... 21
Consolidated Balance Sheet at December 31,
1994 and 1993................................. 22
Consolidated Statement of Cash Flows for the
years ended December 31, 1994, 1993 and 1992.. 23
Notes to Consolidated Financial Statements.... 24 - 34
--------------
2. FINANCIAL STATEMENT SCHEDULE:
Schedule VIII - Valuation and qualifying
accounts..................... S-2
</TABLE>
--------------
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.
<PAGE> 37
(37)
<TABLE>
<CAPTION>
3. EXHIBITS:
Exhibit No.
-----------
<S> <C>
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)
</TABLE>
----------------
(1) Incorporated by reference to Amendment No. 2 to Registration Statement No.
2-88797 on Form S-1, as filed on March 29, 1984.
(2) Incorporated by reference to Annual Report on Form 10-K for the year ended
December 31, 1984.
(3) Incorporated by reference to Amendment No. 1 to Registration Statement No.
2-88797 on Form S-1, as filed on March 13, 1984.
(9) Incorporated by reference to Amendment No. 1 to Registration Statement No.
33-10077 on Form S-1, as filed on December 16, 1986.
(11) Incorporated by reference to Annual Report on Form 10-K for the year ended
December 31, 1987.
(23) Incorporated by reference to Registration No. 33-51823 on Form S-8, as
filed on January 6, 1994.
<PAGE> 38
(38)
<TABLE>
<CAPTION>
Exhibit No.
-----------
<S> <C>
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)
</TABLE>
----------------
(4) Incorporated by reference to Registration Statement No. 2-88797
on Form S-1 as filed on February 2, 1984.
<PAGE> 39
(39)
<TABLE>
<CAPTION>
Exhibit No.
-----------
<S> <C>
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)
</TABLE>
----------------
(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.
<PAGE> 40
(40)
<TABLE>
<CAPTION>
Exhibit No.
-----------
<S> <C>
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)
</TABLE>
--------------
(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.
<PAGE> 41
(41)
<TABLE>
<CAPTION>
Exhibit No.
-----------
<S> <C>
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)
</TABLE>
----------------
(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.
<PAGE> 42
(42)
<TABLE>
<CAPTION>
Exhibit No.
-----------
<S> <C>
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 Dated September 30, 1994 by
and among RBCACQ, Inc. and OddzOn Products, Inc.,
Scott Stillinger and Mark Button. (23)
21.1 List of Subsidiaries
23.1 Report of Independent Accountants
23.2 Consent of Independent Accountants
27.1 Financial Data Schedule
</TABLE>
----------------
(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.
(b) REPORTS ON FORM 8-K
No reports on From 8-K were filed by the Company during the quarter ended
December 31, 1994.
<PAGE> 43
(43)
Undertaking
In order to comply with amendments to the rules governing the use of
Form S-8 under the Securities Act of 1933, as amended, as set forth in
Securities Act Release No. 33-6867, the undersigned Registrant hereby undertakes
as follows, which undertaking shall be incorporated by reference into
Registrant's Registration Statements on Forms S-8 (File Nos. 2-96238, 2-96239,
2-96240, 33-10779, 33-26161, 33-27406, 33-27897 and 33-27898):
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
<PAGE> 44
(44)
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Russ Berrie and Company, Inc.
(Registrant)
By /s/ Paul Cargotch
-----------------------------
Paul Cargotch
Vice President - Finance and
Chief Financial Officer
3/24/95
-----------------------
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 3/24/95
---------------------------------------------- ---------
Russell Berrie, Chairman of the Board,
Chief Executive Officer, and Director
(Principal Executive Officer)
/s/ A. Curts Cooke 3/24/95
---------------------------------------------- ---------
A. Curts Cooke, President, Chief
Operating Officer and Director
(Principal Operating Officer)
/s/ Paul Cargotch 3/24/95
---------------------------------------------- ---------
Paul Cargotch, Vice President - Finance
and Chief Financial Officer
(Principal Financial and Accounting Officer)
<PAGE> 45
(45)
3/ /95
----------------------------------------------- -------
Raphael Benaroya, Director
/s/ Art Charpentier 3/24/95
----------------------------------------------- -------
Arthur D. Charpentier, Director
/s/ Jimmy Hsu 3/23/95
----------------------------------------------- -------
Jimmy Hsu, Director
3/ /95
----------------------------------------------- -------
Charles Klatskin, Director
/s/ Joseph Kling 3/24/95
----------------------------------------------- -------
Joseph Kling, Director
3/ /95
----------------------------------------------- -------
William A. Landman, Director
/s/ Sidney Slauson 3/24/95
----------------------------------------------- -------
Sidney Slauson, Director
/s/ Bernard Tenenbaum 3/24/95
----------------------------------------------- -------
Bernard Tenenbaum, Director
<PAGE> 46
S-2
RUSS BERRIE AND COMPANY, INC. AND SUBSIDIARIES
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
(Dollars in Thousands)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- ---------- ---------- ----------- ---------
BALANCE AT BALANCE
BEGINNING CHARGED TO AT END
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS* OF PERIOD
----------- ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Allowance for accounts receivable:
Year ended December 31, 1992 $ 3,468 $ 4,859 $ 3,098 $ 5,229
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
Allowance for slow moving inventory items:
Year ended December 31, 1992 $ 7,033 $ 6,470 $ 1,853 $11,650
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
</TABLE>
*Principally account write-offs, allowances and disposal of merchandise,
respectively.
<PAGE> 47
Exhibit Index
Exhibit Numbers
21.1 List of Subsidiaries
23.1 Report of Independent Accountants
23.2 Consent of Independent Accountants
27.1 Financial Data Schedule
<PAGE> 1
EXHIBIT 21.1
LIST OF SUBSIDIARIES OF RUSS BERRIE AND COMPANY, INC.
<TABLE>
<CAPTION>
Jurisdiction of
Company Name Incorporation
------------ ---------------
<S> <C>
Russ Berrie and Company South, Inc. Georgia
Russ Berrie and Company West, Inc. California
Russ Berrie and Company Chicago, Inc. Illinois
Russ Berrie and Company Investments, Inc. New Jersey
Russ Berrie (U.K.) Limited England
Russ Berrie (Benelux) B.V. Holland
Tri Russ International (Hong Kong) Limited Hong Kong
Amram's Distributing, Ltd. Canada
Papel/Freelance, Inc. Pennsylvania
Fluf N' Stuf, Inc. Pennsylvania
Papel/Freelance (U.K.) Ltd. England
Bright of America, Inc. West Virginia
Russ Berrie (Ireland) Limited Ireland
Cap Toys, Inc. Ohio
Papel Freelance (Benelux) B.V. Holland
OddzOn Products, Inc. California
Russ Berrie and Company Properties, Inc. New Jersey
RUSSPLUS, Inc. New Jersey
</TABLE>
<PAGE> 1
EXHIBIT 23.1
Report of Independent Accountants
Our report on the consolidated financial statements of Russ Berrie and Company,
Inc. and subsidiaries is included on page 19 of this Form 10-K. In connection
with our audits of such financial statements, we have also audited the related
financial statement schedule listed in the index on page 36 of this Annual
Report on Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Parsippany, New Jersey
February 3, 1995
<PAGE> 1
EXHIBIT 23.2
Consent of Independent Accountants
We consent to the incorporation by reference in the registration statements of
Russ Berrie and Company, Inc. on Forms S-8 (File Nos. 2-96238, 2-96239, 2-96240,
33-10779, 33-26161, 33-27406, 33-27897, 33-27898, and 33-51823) of our reports,
dated February 3, 1995, on our audits of the consolidated financial statements
and financial statement schedule of Russ Berrie and Company, Inc. and
subsidiaries as of December 31, 1994 and 1993 and for each of the three years in
the period ended December 31, 1994, which reports are included in this Annual
Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Parsippany, New Jersey
March 29, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 42,758
<SECURITIES> 5,203
<RECEIVABLES> 61,125
<ALLOWANCES> 5,651
<INVENTORY> 67,052
<CURRENT-ASSETS> 188,892
<PP&E> 52,540
<DEPRECIATION> 27,242
<TOTAL-ASSETS> 254,826
<CURRENT-LIABILITIES> 36,438
<BONDS> 0
<COMMON> 2,395
0
0
<OTHER-SE> 215,993
<TOTAL-LIABILITY-AND-EQUITY> 254,826
<SALES> 278,105
<TOTAL-REVENUES> 278,105
<CGS> 0
<TOTAL-COSTS> 143,867
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 7,024
<INCOME-TAX> 1,697
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,327
<EPS-PRIMARY> 0.25
<EPS-DILUTED> 0.25
</TABLE>
