Rule 424(b)(4)
Reg. No. 333-17005
PROSPECTUS
2,279,952 Shares
DEPARTMENT 56, INC.
Common Stock
(par value $.01 per share)
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The 2,279,952 shares of Common Stock, par value $.01 per share
(the "Common Stock"), of Department 56, Inc., a Delaware
corporation (the "Company"), are being offered by the Selling
Stockholders named herein. See "Selling Stockholders" and "Plan
of Distribution." These shares represent approximately 10.6% of
the total number of shares of Common Stock outstanding as of
December 30, 1996. On Friday, January 3, 1997, the last reported
sale price of the Common Stock, listed under the symbol "DFS", on
the New York Stock Exchange was $24.25 per share.
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See "Risk Factors," beginning on page 3, for a discussion of
certain factors which should be considered by prospective
purchasers of the Common Stock offered hereby.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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Selling Stockholders may sell the shares being offered
hereby in transactions on the New York Stock Exchange, in
negotiated transactions or otherwise, at market prices prevailing
at the time of the sale or at negotiated or fixed prices.
Selling Stockholders may sell some or all of the shares in
transactions involving broker-dealers, who may act either as
agent or principal. To the extent required, the aggregate amount
of Common Stock being offered and the terms of the offering, the
names of the Selling Stockholders, the names of any such agents,
dealers or underwriters and any applicable commission with
respect to a particular offer will be set forth in an
accompanying Prospectus Supplement. The aggregate proceeds to
the Selling Stockholders from the sale of the Common Stock will
be the selling price of the Common Stock sold less the aggregate
agents' commissions and underwriters' discounts, if any, and
other expenses of issuance and distribution not borne by the
Company. The Company will pay substantially all of the expenses
to be incurred, including those to be incurred by the Selling
Stockholders, in connection with the Registration Statement of
which this Prospectus is a part (other than such commissions and
discounts), estimated to be $100,000. See "Selling Stockholders"
and "Plan of Distribution" herein for a description of
indemnification arrangements between the Company and the Selling
Stockholders and possible indemnification arrangements for
agents, dealers and underwriters. None of the proceeds from the
sale of the Common Stock will be received by the Company.
The Selling Stockholders and any agents, dealers or
underwriters that participate with the Selling Stockholders in
the distribution of the Common Stock may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933,
as amended (the "Securities Act"), and any commissions received
by them and any profit on the resale of the Common Stock
purchased by them may be deemed underwriting commissions or
discounts under the Securities Act.
The date of this Prospectus is January 3, 1997.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and, in accordance therewith, files reports, proxy
statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports and other
information, as well as the Registration Statement and the
consolidated financial statements, schedules and exhibits
thereto, may be inspected and copied at the offices of the
Commission at 450 Fifth Street, N.W., Washington D.C. 20549 and
at the following regional offices of the Commission: 7 World
Trade Center, Suite 1300, New York, New York 10048 and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such material or any part thereof may also be
obtained from the Public Reference Section of the Commission, 450
Fifth Street, N.W., Washington D.C. 20549 at prescribed rates.
The SEC also maintains a Web site (http://www.sec.gov) from which
such reports, proxy statements and other information concerning
the Company may be obtained. The Common Stock is traded on the
New York Stock Exchange ("NYSE") and such reports and other
information may also be inspected at the offices of the NYSE, 20
Broad Street, New York, NY 10005.
The Company has filed with the Commission in Washington,
D.C. a Registration Statement (of which this Prospectus is a part
and which term shall encompass any amendments thereto) on Form S-
3 under the Securities Act with respect to the Common Stock
offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement and the
exhibits and schedules thereto, certain portions of which have
been omitted as permitted by the rules and regulations of the
Commission. Statements contained herein concerning the
provisions of any document are not necessarily complete;
reference is made to the exhibits for a more complete description
of the matters involved, and each such statement shall be deemed
qualified in its entirety by such reference. All material
elements of any such documents or descriptions are included in
this Prospectus. For further information pertaining to the
shares offered hereby and to the Company, reference is made to
the Registration Statement, including the consolidated financial
statements, schedules and exhibits filed as a part thereof and
incorporated therein by reference.
The Company will provide, without charge, to each person to
whom this Prospectus is delivered, upon written or oral request
of such person, a copy of any and all of the information that has
been or may be incorporated by reference in this Prospectus,
other than exhibits to such documents (unless such exhibits are
specifically incorporated by reference into such documents).
Such requests should be directed to the Corporate Secretary,
Department 56, Inc., One Village Place, 6436 City West Parkway,
Eden Prairie, MN 55344 (telephone (612) 944-5600).
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year
ended December 30, 1995, its Current Reports on Form 8-K, dated
February 12, 1996, February 15, 1996 and November 14, 1996, its
Quarterly Reports on Form 10-Q for the fiscal quarters ended
March 30, 1996, June 29, 1996 and September 28, 1996, and the
description of its Common Stock set forth in its Form 8-A, dated
April 23, 1993, as amended, and all documents incorporated by
reference therein, all of which have been filed with the
Commission, are hereby incorporated by reference into this
Prospectus. All documents filed by the Company with the
Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act after the date of this Prospectus and prior to the
termination of the offering covered by this Prospectus will be
deemed to be incorporated by reference into this Prospectus and
to be a part hereof from the date of filing of such documents.
Any statement contained herein or in any document incorporated or
deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
THE COMPANY
The Company is a leading designer, importer and distributor
of fine quality collectibles and other giftware products sold
through gift, home accessory and specialty retailers. The
Company is best known for its Village Series of collectible,
handcrafted, lit ceramic and porcelain houses, buildings and
related accessories in the Original Snow Village Collection and
The Heritage Village Collection as well as its extensive line of
holiday and home decorative accessories, including its Snowbabies
collectible porcelain and pewter handpainted figurines.
The Company's principal executive offices are located at One
Village Place, 6436 City West Parkway, Eden Prairie, MN 55344,
and the telephone number of the Company is (612) 944-5600.
RISK FACTORS
In addition to the matters described in the documents
incorporated by reference herein, the following Risk Factor
should be considered by prospective purchasers of the Common
Stock offered hereby:
Foreign Manufacturing And Restrictions On Imports.
The Company does not own or operate any manufacturing
facilities and imports most of its products from manufacturers in
the Pacific Rim, primarily The People's Republic of China, Taiwan
(Republic of China) and The Philippines. The Company also
imports a small percentage of its products from sources in
Europe, primarily Italy, England and Germany.
The Company's ability to import products and thereby satisfy
customer orders is affected by the availability of, and demand
for, quality production capacity abroad. The Company competes
with other importers of specialty giftware products for the
limited number of foreign manufacturing sources which can produce
detailed, high-quality products at affordable prices. The
Company is subject to the following risks inherent in foreign
manufacturing: fluctuations in currency exchange rates; economic
and political instability; transportation delays; restrictive
actions by foreign governments; nationalizations; the laws and
policies of the United States affecting importation of goods
(including duties, quotas and taxes); and trade and foreign tax
laws. In particular, the Company's costs could be adversely
affected if the currencies of other countries in which the
Company conducts business appreciate significantly relative to
the United States dollar.
Substantially all of the Company's products are subject to
United States customs duties and regulations pertaining to the
importation of goods, including requirements for the marking of
certain information regarding the country of origin on the
Company's products. In the ordinary course of its business, from
time to time, the Company is involved in disputes with the United
States Customs Service regarding the amount of duty to be paid,
the value of merchandise to be reported or other customs
regulations with respect to certain of the Company's imports,
which may result in the payment of additional duties and/or
penalties, or which may result in the refund of duties to the
Company. The United States and the countries in which the
Company's products are manufactured or shipped may, from time to
time, impose new quotas, duties, tariffs or other charges or
restrictions, or adjust presently prevailing quotas, duty or
tariff levels, which could adversely affect the Company's
financial condition or results of operations or its ability to
continue to import products at current or increased levels. In
particular, the Company's costs may be increased, or the mix of
countries from which it sources its products may be changed, in
the future if countries which are currently accorded "Most
Favored Nation" status by the United States cease to have such
status or the United States imposes retaliatory duties against
imports from such countries. The Company cannot predict what
regulatory changes may occur or the type or amount of any
financial impact on the Company which such changes may have in
the future.
In fiscal year 1995, approximately 40% (as compared to 29%
in 1994) of the Company's imports were manufactured in The
People's Republic of China, which is currently accorded "Most
Favored Nation" status and generally is not subject to U.S.
retaliatory duties. The proportion of the Company's imports
manufactured in The People's Republic of China increased in 1996
and the Company expects such proportion will increase further in
the future. Various commercial and legal practices widespread in
The People's Republic of China, including the handling of
intellectual properties, as well as certain political and
military actions taken by The People's Republic of China in
relation to Taiwan, are under review by the United States
government and, accordingly, the duty treatment of goods imported
from The People's Republic of China is subject to political
uncertainties. To the extent The People's Republic of China
ceased to have "Most Favored Nation" status or its exports were
subject to political retaliation, the cost of importing products
from such country would increase significantly, and the Company
believes that there could be a short-term adverse effect on the
Company until alternative manufacturing arrangements were
obtained.
USE OF PROCEEDS
The shares of Common Stock covered by this Prospectus are
offered for the account of the Selling Stockholders. The Company
will not receive any of the proceeds from the sale of Common
Stock offered hereby. See "Selling Stockholders".
SELLING STOCKHOLDERS
The Selling Stockholders consist of individuals,
corporations, trusts and other entities that have undivided
interests in the Partnerships discussed in "Plan of
Distribution." Following the distribution of the shares held by
the Partnerships to such persons, they will hold the shares for
their own accounts. Except for Nicholas C. Forstmann, Theodore
J. Forstmann, Wm. Brian Little, Sandra J. Horbach and Arthur T.
Shorin, who are directors of the Company, none of the Selling
Stockholders has held a position, office or had a material
relationship with the Company within the past three years other
than as a result of the ownership of the Common Stock and certain
debt instruments of the Company, and the ownership of interests
in the Partnerships.
The following table sets forth for each Selling Stockholder
the number of shares of Common Stock beneficially owned, as of
the date hereof, after giving pro forma effect to the
distribution of shares by the Partnerships. Except as
specifically indicated in the notes to the table, this Prospectus
covers the offering by the Selling Stockholders of all of the
shares listed in the table, and if all of such shares are sold by
the Selling Stockholders, the Selling Stockholders will no longer
own any shares of Common Stock (other than shares, if any,
purchased after the date hereof):
SHARES BENEFICIALLY
OWNED FOLLOWING
DISTRIBUTION
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Name Number Percent
- --------------------------------------- ------- -------
William R. Acquavella 3,391 *
Aetna Casualty & Surety Company 8,387 *
Aetna Life Insurance Company 47,199 *
William J. Armfield, IV 848 *
BankAmerica Capital Corporation 139,846 *
Michel C. Bergerac 3,391 *
Bankers Trust Company as Trustee 95,922 *
of the GTE Service Corporation Plan
for Employees' Pensions
Pitt & Co. 45,925 *
3M Employee Retirement Income Plan 44,908 *
Kodak Retirement Income Plan 98,384 *
Eli Broad 25,430 *
James E. Burke 1,695 *
Capiltech Holding Corp. 5,086 *
Boeing Employee Retirement Plan 138,117 *
James J. Delmonico 509 *
Citibank FSB as Directed Trustee 53,385 *
of the Delta Master Trust
Trustees of General Electric 285,047 1.3%
Pension Trust (1)
Richard P. Hausman (1) 4,195 *
Herbert Family Trust, UA Dtd. 4/20/82 1,356 *
Marilyn Hausman, Successor Trust UA 847 *
Dtd. 1/29/91
Gavin Herbert, Successor Trust, 847 *
UA Dtd. 1/29/91
Lewis J. Whitney, III, TTEE 170 *
William J. Cox 170 *
Hillman/Dover Limited Partnership 33,907 *
Chase Manhattan Bank as directed 227,069 1.1%
Trustee for the IBM Retirement Fund
Indofin Partners L.P. 3,391 *
Robert F. Johnston 2,543 *
Hare & Co. 27,956 *
George A. Kellner 1,695 *
Kincaid Family Trust 848 *
Steven M. Kincaid 848 *
Terry Allen Kramer 5,086 *
Jader Trust #4 8,477 *
John J. Langdon (1) 2,695 *
Roger D. Lapham, Jr. 678 *
Lilly F. Lawrence 424 *
Howard H. Leach Living Trust Dtd. 8,115 *
9/5/86 as amended 2/17/95
Gretchen Leach Living Trust 330 *
Dayna Karol Parker 32 *
Leeway & Co. 196,588 *
The London Mortgage Trust Ltd. 5,086 *
CBC Capital Partners, Inc. 70,338 *
Pension Reserves Investment 34,455 *
Management Board (1)
McMicking Ventures I 848 *
Merifin Capital N.V. 16,953 *
Kane & Co. (New York State Common 179,635 *
Retirement Fund)
T.I. Employees Pension Trust 53,385 *
Henry M. O'Neill 5,086 *
Ophelia Holdings Inc. 3,391 *
Roger S. Penske 1,695 *
Arthur T. Shorin (1)(2) 36,695 *
Joel B. Leff 1,695 *
Daniel J. Sullivan 1,695 *
Tinicum Investors 16,529 *
State of Wisconsin Investment Board (1) 531,941 2.47%
Cecile Zilkha 3,391 *
Kenneth F. Yontz 848 *
Transom Investments N.V. 33,907 *
Richard W. Vieser 1,695 *
Theodore J. Forstmann 93,412 *
Wm. Brian Little (1) 81,006 *
Judith A. Billings 827 *
Judith A. Little 1,707 *
Gregory S. Little 1,707 *
Jacqueline P. Little 1,707 *
Nicholas C. Forstmann 48,394 *
John A. Sprague 23,568 *
Steven B. Klinsky 22,922 *
Winston W. Hutchins 5,251 *
Sandra J. Horbach (1) 10,046 *
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* The percentage of shares of Common Stock beneficially owned
is less than one percent of the outstanding shares of Common
Stock.
(1) Includes the following number of shares in addition to the
shares being distributed from the Partnerships: State of
Wisconsin Investment Board, 450,600 shares; Trustees of
General Electric Pension Trust, 10,000 shares; Pension
Reserves Investment Management Board, 6,500 shares; Richard
P. Hausman, 2,500 shares; John J. Langdon, 1,000 shares;
Sandra J. Horbach, 5,000 shares; Arthur T. Shorin, 35,000
shares; Wm. Brian Little, 25,000 shares. These shares are
not being offered pursuant to this Prospectus and (unless
sold otherwise than pursuant to this Prospectus) will
continue to be beneficially owned by such Selling Stockholders
following the sale of all shares offered hereby.
(2) Includes options to purchase 30,000 shares of Common Stock
of the Company. Each director who is neither a partner in
FLC Partnership, L.P. nor a current or former officer of the
Company or its subsidiaries was granted, in connection with
his initial election to the Board of Directors of the
Company, an option to purchase 30,000 shares of Common Stock
at an exercise price equal to the fair market value of the
Common Stock on the date of the grant and becoming
exercisable in equal annual installments over a period of 3
years.
PLAN OF DISTRIBUTION
On January 3, 1997, Forstmann Little & Co. Subordinated Debt
and Equity Management Buyout Partnership-IV ("MBO-IV") and
Department 56 Partners, L.P. ("Department 56 Partners," and,
together with MBO-IV, the "Partnerships") which previously owned
beneficially approximately 5.0% and 5.6% of the outstanding
shares of Common Stock, respectively, will distribute, pursuant
to the Registration Statement of which this Prospectus is a part
(the "Distribution"), all of the shares of Common Stock owned by
each of them to their respective partners. In certain instances,
some of the partners of the Partnerships will further distribute
such shares of Common Stock to their ultimate beneficial owners
(some of whom already own shares of Common Stock in their
individual capacities), all of which shares are being offered for
sale hereby. The distributees of the shares of Common Stock
previously owned by the Partnerships are hereinafter collectively
referred to as the "Selling Stockholders," each of whose name and
share ownership is set forth under the caption "Selling
Stockholders." The Company has agreed to register under the
Securities Act the shares of Common Stock being sold by the
Selling Stockholders. The Company will pay substantially all of
the expenses to be incurred by the Selling Stockholders in
connection with the Registration Statement of which this
Prospectus is a part (other than commissions and discounts),
estimated to be $100,000. The Company will not receive any
proceeds from this offering. The Company has agreed to indemnify
the Selling Stockholders and their agents, underwriters and
dealers against certain civil liabilities, including liabilities
under the Securities Act.
Selling Stockholders may sell the shares being offered
hereby in transactions on the NYSE, in negotiated transactions or
otherwise, at market prices prevailing at the time of the sale or
at negotiated or fixed prices. Selling Stockholders may sell
some or all of the shares in transactions involving broker-
dealers (including, among others, Goldman, Sachs & Co., who will
initially be acting as custodian with respect to some of the
shares distributed to the Selling Stockholders), who may act
either as agent or principal, and who may receive compensation in
the form of discounts, commissions or concessions from Selling
Stockholders or the purchaser of shares for whom such broker-
dealers act as agent or to whom they sell as principal, or both.
At the time a particular offer of shares of Common Stock is
made, a Prospectus Supplement will be distributed, to the extent
required, which will set forth the aggregate number of shares of
Common Stock being offered and the material terms of the
offering, including the name or names of any underwriters,
dealers or agents, the purchase price to be paid by any
underwriter or dealer for Common Stock purchased from the Selling
Stockholders, any discounts, commissions and other items
constituting compensation from the Selling Stockholders and any
discounts, commissions or concessions allowed or reallowed or
paid to dealers, and the proposed selling price to the public.
The Selling Stockholders and any underwriters, dealers or
agents that participate in the distribution of the Common Stock
may be deemed to be "underwriters" under the Securities Act, and
any profit on the sale of the Common Stock by them and any
discounts, commissions or concessions received by any such
underwriters, dealers or agents might be deemed to be
underwriting discounts and commissions under the Securities Act.
EXPERTS
The consolidated balance sheets of the Company as of
December 30, 1995 and December 31, 1994, the related consolidated
statements of income, stockholders' equity and cash flows for the
years ended December 30, 1995, December 31, 1994 and January 1,
1994 and the related financial statement schedules, incorporated
in this Prospectus by reference from the Company's Annual Report
on Form 10-K for the year ended December 30, 1995, have been
audited by Deloitte & Touche LLP, independent auditors, as stated
in their reports, which are incorporated herein by reference and
have been so incorporated in reliance upon the reports of such
firm given upon their authority as experts in accounting and
auditing.
LEGAL OPINION
The validity of the shares of Common Stock being offered by
this Prospectus is being passed upon for the Company by Fried,
Frank, Harris, Shriver & Jacobson, a partnership including
professional corporations.
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No person has been authorized to give any information or to
make any representations other than those contained in this
Prospectus, and, if given or made, such information or
representations must not be relied upon as having been
authorized. This Prospectus does not constitute an offer to
sell, or the solicitation of an offer to buy, any securities
other than the securities to which it relates or an offer to
sell, or the solicitation of an offer to buy, such securities in
any circumstances in which such offer or solicitation is
unlawful. Neither the delivery of this Prospectus nor any sale
made hereunder shall, under any circumstances, create any
implication that the information herein is correct as of any time
subsequent to its date.
TABLE OF CONTENTS
Page
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Available Information.......................................2
Incorporation of Certain Documents by Reference.............2
The Company.................................................3
Risk Factors................................................3
Use Of Proceeds.............................................4
Selling Stockholders........................................4
Plan of Distribution........................................7
Experts.....................................................7
Legal Opinion...............................................7
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2,279,952 Shares
DEPARTMENT 56, INC.
Common Stock
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PROSPECTUS
--------------------------
January 3, 1997
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