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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ____________ to ____________.
Commission File Number: 0-1349
STANHOME INC.
(Exact name of registrant as specified in its charter)
Massachusetts 04-1864170
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
333 Western Avenue, Westfield, Massachusetts 01085
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (413) 562-3631
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, par value $.125 New York Stock Exchange
per share, together with the The Pacific Stock Exchange
Associated Common Stock Purchase Rights
("Common Stock")
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes [X] No[_]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K.
[X]
State the aggregate market value of the voting stock held by non-
affiliates of the registrant: $482,520,513 on January 31, 1996.
The number of shares outstanding of the registrant's Common Stock as
of March 18, 1996 was 18,392,042 Shares.
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Parts I, II, and IV of this Form 10-K incorporate by reference
certain information from the registrant's Annual Report to Stockholders for
fiscal year ended December 31, 1995. Part III of this Form 10-K
incorporates by reference certain information from the registrant's
definitive Proxy Statement dated March 15, 1996, for its Annual Meeting of
Stockholders to be held on April 25, 1996.
P A R T I
ITEM 1. BUSINESS.
Through its subsidiaries' operations, the Company sells two primary
categories of quality products worldwide using three distinct distribution
channels: (1) designed and licensed collectible figurines and ornaments,
action musicals, decorative home accents, and other giftware are sold at
wholesale to independent retailers; (2) collectible plates, dolls,
figurines, and other giftware and non-giftware consumer products are sold
directly to consumers through direct response marketing; and (3)
manufactured or purchased home and personal care products, giftware,
cosmetics, and other items are sold and distributed principally through
party plan and catalog direct selling methods.
Giftware and Collectible Products
Wholesale sales of giftware and collectible products are principally
effected through the Company's Enesco Worldwide Giftware Group which is led
by Enesco Corporation ("Enesco"), a subsidiary of the Company, with its
headquarters offices located in Itasca, Illinois and its principal
showroom, large warehouse and distribution center complex located in nearby
Elk Grove Village, Illinois. Enesco is a leading importer and distributor
of creatively designed giftware items, including proprietary and licensed
lines and collectibles. Its products include diverse lines of porcelain
and cold cast figurines, musicals and music boxes, dolls, ornaments,
waterballs, decoupage, miniatures, jack-in-the-boxes, tinware, home
accessories, and other giftware primarily produced by independent
manufacturers in the Far East, with total production capacity in several
cases being exclusively devoted to Enesco products.
Enesco sells its products through three separately managed divisions,
each with its own sales organization comprised of independent sales
representatives. Each of the Designed Giftware and Gift Gallery divisions
has approximately 240 independent sales representatives servicing defined
territories with their respective giftware lines. The third division,
International Collections, is serviced by about 75 sales representatives
offering decorative accessories for the home from the product lines of
Lilliput, Border Fine Arts, Otagiri, and Via Vermont. Enesco displays the
Worldwide Giftware Group products of the three divisions in fifteen
showrooms located in the U.S. as well as at periodic trade and private
shows held in major U.S. and foreign cities. These products are marketed
principally in the U.S. through more than 30,000 independent retail
outlets, including gift stores, greeting card and gift shops, national
chains, mail order houses, and department stores. Consumer Appreciation,
Inc., an Enesco affiliate, administers the Group's collectors clubs and
promotional advertising. Foreign affiliates and distributors of the Enesco
Worldwide Giftware Group are presently located in Australia, Brazil,
Canada, Chile, France, Germany, Hong Kong, Italy, Japan, Mexico, The
Netherlands, People's Republic of China, Philippines, Singapore, Taiwan,
Thailand, and the United Kingdom.
The product lines of the Worldwide Giftware Group are based partially
on Enesco's collection of proprietary designs and partially on licenses
Enesco has with independent creative designers. Most of its products,
whether or not produced under license, are protected by trademark and/or
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copyright registrations in the U.S. and many foreign countries. Principal
product trademarks of the Enesco Worldwide Giftware Group include ENESCO,
TREASURED MEMORIES, GROWING UP, LAURA'S ATTIC, ENESCO SMALL WONDERS, SMALL
WORLD OF MUSIC, ELUSIVE LEGEND, THE ENESCO TREASURY OF CHRISTMAS ORNAMENTS,
CHERISHED TEDDIES, CALICO KITTENS, VIA VERMONT, SPORTS IMPRESSIONS, MOOSE
CREEK CROSSING, CORAL KINGDOM, MARY'S MOO MOOS, LILLIPUT LANE, BORDER FINE
ARTS, and OTAGIRI. Among its important licensed lines are PRECIOUS
MOMENTS, CHERISHED TEDDIES, MEMORIES OF YESTERDAY, LUCY & ME, CHAPEAU
NOELLE, CALICO KITTENS, BARBIE, PENNYWHISTLE LANE, MY BLUSHING BUNNIES,
MELLY & FRIENDS, POCAHANTAS, A CELEBRATION OF LIFE, SISTERS & BEST FRIENDS,
MICKEY & CO./DISNEY, COCA COLA, GNOMES, THE WORLD OF SINTERKLAAS, SESAME
STREET, McDONALD'S, IVORY CATS, COW KISSES, PRETTY AS A PICTURE, HOGS &
KISSES, ROSE O'NEIL KEWPIE COLLECTION, ELVIS PRESLEY, THE BEATLES, STAR
TREK, WIZARD OF OZ, SANDMAN, VICTORIAN BELLES, COUNTRY HAMLET, PUREBRED
PUPS, ALL THAT JAZZ, and IN HIS NAME.
The internal development and licensing of innovative new product
designs lessens Enesco's dependency on existing trademarks or copyrighted
designs. Protection of all of the intellectual property is important to
the Company's business, and Enesco has maintained an aggressive and visible
program to identify and challenge companies and individuals who infringe
its registered trademarks and copyrighted designs. The rights with respect
to the licensed lines are materially important to Enesco because of the
substantial volume of sales represented by these products, especially the
PRECIOUS MOMENTS and CHERISHED TEDDIES product lines which accounted for
approximately 28% and 11% of the Company's consolidated revenue during
1995, respectively.
Giftware and collectible products sold in the Via Vermont, Lilliput,
and Border Fine Arts lines are supplied by manufacturing plants owned by
Stanhome's subsidiaries operating in Mexico, England, and Scotland,
respectively. Manufacturing and distribution operations in Europe, both
affiliates and distributors, are managed by Enesco European Giftware Group
Limited, a subsidiary of the Company, with its headquarters located in
Penrith, Cumbria, England. Enesco Worldwide Giftware Group operations are
supplied by these manufacturing plants and Enesco's affiliate in Hong Kong,
Enesco International (H.K.) Limited, which assists Enesco by ordering and
overseeing the production of collectibles and giftware products by
independent manufacturers, which are located principally in China, Hong
Kong, and Taiwan, and to a lesser extent in the Philippines, Indonesia, and
Thailand. In addition, this affiliate assists the Company's direct selling
operations in Europe and Latin America by sourcing premium items and
giftware manufactured in the Far East. N.C. Cameron & Sons Limited, a
subsidiary of the Company and a member of the Enesco Worldwide Giftware
Group located in Mississauga, Ontario, Canada, sources its products not
only through Enesco's manufacturing subsidiaries and Enesco International
(H.K.) Limited but also from other Far Eastern, European, and Canadian
manufacturers. Enesco and its affiliates require all manufacturing
sources, whether Company affiliates or contract manufacturers, to comply
with quality standards established and enforced by the Company and its
subsidiaries.
Competition in the giftware business in North America, Europe, and
the Far East is highly fragmented among a diversity of collectible and
giftware product categories. The principal factors affecting success in
the marketplace are originality of product design, quality, sourcing
marketing ability, customer service, and price. The Company believes that
Enesco is a significant factor in the U.S. giftware business among a small
number of sizable, and largely privately-held, competitors within the
industry, which businesses include Hallmark, Department 56, Lladro, and
Silvestri, among others. Enesco European Giftware Group Limited, which
manages businesses under the brand names of Lilliput Lane, Border Fine
Arts, Enesco, and Hamilton Collection, is the third largest quality
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giftware distributor in the U.K., behind only Wedgwood and Royal Doulton.
It maintains an employed sales organization based in the United Kingdom
along with a network of distributors and multiple independent sales agents
throughout continental Europe. The Enesco Worldwide Giftware Group's sales
tend to peak in the third and fourth quarters. As of the end of 1995, the
Enesco Worldwide Giftware Group had a backlog of firm orders totaling
$78,400,000, as compared to $93,400,000 as of the end of 1994. The Company
expects that substantially all of the existing order backlog will be
fulfilled during 1996. It is a standard practice within the giftware
industry, however, that orders are subject to amendment or cancellation by
customers prior to shipment. Because of the multiplicity of external
factors that can impact the status of unshipped orders at any particular
time, the comparison of backlog orders in a given year with those at the
same date in a prior year is not necessarily indicative of sales
performance for that year or for prospective sales results in future years.
Backlog orders can also be affected by various programs employed by the
Company to induce its customers to place orders and accept shipments at
specified times in the year. In addition, extended credit and payment
terms have been and will continue to be key marketing tools. The Enesco
Worldwide Giftware Group plans to utilize similar sales promotions in 1996
to those it employed in 1995 and 1994.
Over the years, there has been an ongoing issue in the U.S. as to the
classification of sales representatives as employees or independent
contractors, with resulting tax and other legal consequences to the worker
and company involved. The U.S. Internal Revenue Service and Congress
periodically have expressed interest in this area in general, and some
states have challenged from time to time the classification of positions
within the Enesco sales organizations. The federal government is reviewing
this issue as well and management expects increased attention on the status
of workers from both federal and state governments in the future.
Sales of giftware and collectible products through direct mail
marketing and print advertising are made directly to U.S. and Canadian
consumers by The Hamilton Collection, Inc., a subsidiary of the Company,
with its headquarters and warehouse facilities located in Jacksonville,
Florida, and to European collectors by the Hamilton Collection division of
Enesco European Giftware Group Limited (collectively "Hamilton"). The
Hamilton business in the U.K. became part of Enesco European Giftware Group
Limited effective January 1, 1995. During 1995, the former President and
Chief Executive Officer of Hamilton and his senior financial staff were
succeeded by a new President and Chief Executive Officer having over ten
years of experience within the direct response industry and a new Chief
Financial Officer and other staff.
Hamilton's direct mail promotions and media advertisements offered
approximately 120 new products during 1995, primarily collectible plates,
dolls, and figurines. The artwork incorporated in these items is, for the
most part, licensed from well known artists and many feature television and
motion picture properties. In 1994, limited-edition dolls accounted for
31% of Hamilton's sales. In 1995, its collectible plates, hand-painted
sculptures, and other non-doll product categories continued to grow in the
aggregate as a percentage of sales and accounted for over 70% of total
Hamilton sales. The principal trademark of Hamilton is THE HAMILTON
COLLECTION.
Most of Hamilton's products are advertised and sold increasingly to
targeted audiences as part of a collection series. Generally, the consumer
is offered the opportunity to purchase a single item (often limited edition)
for which the Company has anticipated related follow-up items. After the
initial purchase, the collector may be offered additional products over a
period of time based upon the same theme and often utilizing the same
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artist as the first product purchased. Advertising costs total
approximately 53% of all Hamilton sales, but this ratio is expected to
decrease as Hamilton focuses its solicitations more to predetermined,
target audiences by mail as opposed to general media advertising. A key
factor in achieving continued sales growth for Hamilton, especially in the
sculpture and figurine category during 1995, has been the sale of product
with no down payment and, particularly in the case of dolls, sales on
installment payments and subsequent shipments in a collection series. The
collector may typically purchase a product with either little or no down
payment and a small number of interest-free installment payments, depending
on the price of the product.
Hamilton sources its products in the U.S., Great Britain, Germany,
Italy, and the Far East from Enesco International (H.K.) Limited and
numerous contract manufacturers that comply with quality standards
established and enforced by the Company and its subsidiaries. It has an
expanding customer mailing list of over 1,300,000 buyers and collectors.
Hamilton's principal licensed properties include: PRECIOUS MOMENTS, THE
WIZARD OF OZ, CHERISHED TEDDIES, STAR WARS, I LOVE LUCY, THE GIFTED LINE,
NASCAR, and STAR TREK. Well known artists include Chuck Ren, Chuck Dehaan,
Connie Walser Derek, Donald Zolan, Sandra Kuck, Thomas Blackshear, Jim
Lamb, Helen Kish, Samuel J. Butcher, and Ted Xaras.
Hamilton is faced with substantial competition in its North American
markets. Competition in direct response marketing exists with respect to
price, product design and innovation, licensing, quality, advertising and
marketing ability, and customer service. The Company believes that
Hamilton is a growing factor in the U.S. among the handful of prominent
giftware and manufactured collectibles companies whose products are sold to
the public through direct response mail and media. These industry leaders
include Danbury Mint, Franklin Mint, Bradford Exchange, and Lenox
Collection, three of which have significantly larger sales volumes than
Hamilton. The volume of sales of Hamilton peaks in the third and fourth
quarters.
All of Hamilton's direct mail solicitations and most of its product
orders are shipped to customers through the U.S. Postal Service and
increased rates for this service, as well as increased media advertising
and paper costs, have had a substantial, unfavorable impact on Hamilton's
operating profit during 1995.
Home and Personal Care Products
Sales of home and personal care products are made directly to
consumers by the Company's Stanhome Worldwide Direct Selling Group which is
now composed of direct selling operations conducted by subsidiaries of the
Company in France, Italy, Mexico, Slovenia, Spain, and Venezuela and
managed out of the Stanhome Worldwide Direct Selling Group, Inc. offices in
Paris, France. In the first half of 1996, the Worldwide Direct Selling
Group expects to commence new business activities in Colombia. These
operations distribute and sell, and some manufacture as well, a broad line
of home care items and personal care and other products, including
specialty chemical products for household use, cleaning equipment,
cosmetics, toiletries, undergarments, and general giftware. During 1995,
the Company exited from its North American direct selling operations, known
as Stanley Home Products, which resulted in the closing of its direct
selling facilities in the U.S. and Puerto Rico. For these operations, the
Company has licensed the products, trademarks, and business to CPAC, Inc.
for continued direct selling in these jurisdictions plus Canada until 2010.
During 1995, in addition to a change in the Chief Executive Officer of the
Worldwide Direct Selling Group, the Group's management underwent some
changeover in key countries to better align managerial skills and
experience with the Group's many challenges. The Group's local direct
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selling operations in Mexico and Venezuela were affected by monetary
devaluations suffered in those countries during 1995.
Worldwide sales of home care items and personal care products to
consumers generally result from the direct selling method known as the
"Famous Stanley Hostess Party Plan". Under this method a homemaker, or
hostess, invites her friends and neighbors to her home to view a
demonstration of Stanhome products by an independent Stanhome dealer, in
return for which she usually receives premium prizes or gifts. After the
demonstration, the dealer solicits orders from those present. In Italy and
France, the local affiliate of the Company sells the ordered products
directly to the consumer, pays a commission to the dealer on those sales,
and distributes the premiums to the hostess. In other countries, the
dealer purchases products at wholesale from the local affiliate of the
Company to fill her orders and resells the products at retail to the
consumers who placed the orders either at the home demonstration, through
catalog solicitations, door-to-door and other non-party sales, or over the
telephone. The dealer may also purchase premiums from the local affiliate
to distribute to the hostess as prizes or gifts for hosting the
demonstration. These premium prizes or gifts generally consist of cookware
and other useful or decorative household items that are purchased from
multiple independent suppliers located around the world.
The independent contractor relationship between the independent
Stanhome dealers and the Worldwide Direct Selling Group has proven
adaptable in most of the foreign jurisdictions in which the Company
conducts its direct selling business. Government efforts to broaden social
benefit coverage, as well as to impose additional taxes on occupations
including dealers, affects the local affiliates' recruiting and marketing
approach and results, in some cases, in additional expense for them. In
Italy, for example, dealers have been impacted by previously reported
income and VAT tax claims made against them by the Italian government.
Registration and potential new social benefit taxes under consideration by
the Italian government will continue to affect the dealer force. The
Company's Italian subsidiary, Stanhome S.p.A., along with other Italian
direct selling companies, has been active in its opposition to the latter
potential taxes. While the implementation of these taxes has been delayed,
there can be no assurance that the opposition to these particular taxes
will ultimately be successful.
Wholesale products sold in Mexico, Spain, and Venezuela are largely
supplied by manufacturing plants owned by Stanhome's subsidiaries operating
in those countries. The remaining foreign operations are supplied by these
manufacturing plants, and, in France, Italy, and Venezuela, partially by
independent local manufacturing licensees. All products of the Stanhome
Worldwide Direct Selling Group, whether manufactured by Company affiliates
or by contract manufacturers, comply with quality standards established and
enforced by the Company and its subsidiaries.
The Stanhome Worldwide Direct Selling Group also has license
arrangements in Brazil, Canada, Puerto Rico, and the U.S. Distribution
arrangements are currently in effect with independent distributors of the
Company's home and personal care products in the Caribbean area, Cyprus,
Portugal, and Thailand.
The direct selling operations of the Company are faced with
substantial competition in all markets in which they are engaged.
Competition in direct selling worldwide exists not only with respect to
price and product performance, but also with respect to obtaining and
retaining an adequate number of dealers, which is of material importance to
the success of the direct selling business. Like other direct selling
companies, there is a substantial turnover in dealers, particularly with
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respect to individuals who engage in this independent business activity
only on a part-time and occasional basis. The recruiting process is
therefore a continuous one. The retention of key sales personnel is highly
dependent on interpersonal relationships and loyalties as well as on
competitive remuneration systems.
While adequate figures are not available for precise comparisons, the
Company believes that the Stanhome Worldwide Direct Selling Group is a
major factor among the large group of companies whose products are sold to
the public via the party plan sales method in those principal foreign
markets where affiliates of the Group are doing business. This is
particularly the case in Italy, where the Company's local subsidiary is
considered a major direct selling organization. While this operation
accounted for less than half of the Worldwide Direct Selling Group's total
1995 sales, it produced more than half of the Group's 1995 operating
profits. Sales for the direct selling subsidiaries tend to peak in the
fourth quarter and, to a lesser degree, in the second quarter.
The Company's direct selling trademarks are generally protected by
registrations in the U.S. and foreign countries where its product line is
marketed and by registrations of its major trademarks in many other
countries throughout the world. The principal trademark is the STANHOME
name and design. These marks play a substantial role in the identification
and acceptance of the Company's products by consumers. The Company's
direct selling business is not materially dependent on patents or patent
protection. Similarly, while the Company owns a large number of formulae
and regards many of its manufacturing processes as secret, it does not
believe that its business is materially dependent upon the maintenance of
secrecy with respect to such formulae or processes.
Other Information
As of December 31, 1995, the Company and its U.S. subsidiaries
employed approximately 1,480 persons on a full-time basis. There were also
approximately 550 Enesco sales representatives engaged in selling the
Company's products in the U.S., all of whom are independent contractors.
As of the same date, the Company's foreign subsidiaries employed
approximately 3,360 persons on a full-time basis. Additionally, there were
approximately 54,250 Stanhome Worldwide Direct Selling Group dealers, most
of whom are recognized in their respective foreign countries as independent
contractors.
For financial information about industry segments, including
financial information regarding foreign and domestic operations, see Note 6
of "Notes to Consolidated Financial Statements" included on pages 44 and 45
of the 1995 Annual Report to Stockholders, which is incorporated herein by
reference.
See also "Management's Discussion and Analysis of Financial Condition
and Results of Operations" commencing on page 21 of the 1995 Annual Report
to Stockholders, which is incorporated herein by reference, for a
comparison and discussion of the results of operations and operating profit
from foreign and domestic sources within each business segment.
ITEM 2. PROPERTIES.
The principal physical properties of the Company and its subsidiaries
in the United States, all of which are owned unless otherwise noted,
consist of the following: Corporate Headquarters - 333 Western Avenue,
Westfield, Massachusetts; headquarters offices of Enesco in Itasca,
Illinois; and showroom, warehouse, and distribution facilities for Enesco's
giftware business in Elk Grove Village, Illinois. Enesco also leases
showrooms in various other locations in the U.S. for the display of its
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products. The Hamilton Collection, Inc. leases office headquarters and
warehouse space in Jacksonville, Florida. In addition, a former office of
Stanley Home Products (U.S.), manufacturing, and warehouse facilities in
Easthampton, Massachusetts and the former direct selling warehouse and
distribution center situated in San Antonio, Texas are still owned but are
currently being offered for sale as part of the Company's ongoing worldwide
restructuring.
Outside of the U.S., the principal physical properties of the
Company's Worldwide Direct Selling Group subsidiaries, all of which are
owned unless otherwise noted, consist of 8 major manufacturing and/or
distribution facilities located in France, Italy, Mexico, Spain, and
Venezuela. Some of these foreign manufacturing plants had, and continue to
have, additional capacity available. In addition, the various direct
selling foreign subsidiaries maintain numerous sales and administrative
offices as well as smaller distribution facilities, most of which are
leased. The principal physical properties relating to the foreign
subsidiaries of the Enesco Worldwide Giftware Group are for the most part
owned. These include Via Vermont, S.A. de C.V., which owns an assembly and
distribution facility in San Miguel de Allende, Guanajuato, Mexico; and
Enesco European Giftware Group Limited, which owns manufacturing plants and
warehouse facilities in Penrith, Workington, and Carlisle, Cumbria,
England, and in Langholm, Dumfriesshire, Scotland. These manufacturing
facilities are generally operating at capacity.
ITEM 3. LEGAL PROCEEDINGS.
There are various legal proceedings pending against the Company and
its subsidiaries which have arisen during the course of business. While
Management cannot predict the eventual outcome of these proceedings, it
believes that none of these proceedings will have a material adverse impact
upon the consolidated financial statements of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
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EXECUTIVE OFFICERS OF THE REGISTRANT
Date First
Name Age Positions Elected
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G. William Seawright 54 Director 3/08/90
President and Chief
Executive Officer 11/09/93
Member of the Executive
Committee 4/22/93
Prior to Mr. Seawright joining the Company in November, 1993, he was
President and Chief Executive Officer of The Paddington Corporation, an
importer of wines and spirits, in Fort Lee, New Jersey since 1990, after
having previously served as the President of Heublein International and a
Senior Vice President of Heublein, Inc. since 1986.
Allan G. Keirstead 51 Director 4/25/85
Executive Vice President
and Chief Administrative
Officer 4/28/88
Chief Financial Officer 4/28/83
Controller 12/02/81
Member of the Executive
Committee 4/25/85
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Prior to Mr. Keirstead's election as Executive Vice President and
Chief Administrative Officer, he served as Financial Vice President from
January, 1983 to April, 1988. He served as Assistant Controller from
April, 1977 to December, 1981.
Eugene Freedman 71 Executive Vice President 4/28/88
President and CEO of Enesco
Worldwide Giftware Group 9/06/89
Mr. Freedman previously served as a Vice President of the Company
from January, 1984 to April, 1988. He also has served for many years as
President and Chief Executive Officer of Enesco Corporation, a subsidiary
of the Company, of which Mr. Freedman was a founder in 1959.
Michael W. Burgess 45 Vice President 9/06/95
President and CEO of Hamilton
Worldwide Direct Response Group 8/01/95
Prior to Mr. Burgess joining the Company in and serving as President
and Chief Executive Officer of The Hamilton Collection, Inc., a subsidiary
of the Company, since August, 1995, he was a founding partner of Stratos
Consulting, a direct response industry consultant, in Destin, Florida since
1994. Previously, Mr. Burgess was General Manager of Franklin Mint -
Europe since 1992, after having earlier served as Corporate Vice President
of Sales Administration and Vice President, U.S. Media Management of
Franklin Mint since 1989 and 1987, respectively.
John J. Dur 44 Vice President 2/01/95
President and CEO of Stanhome
Worldwide Direct Selling Group 1/16/95
Prior to Mr. Dur joining the Company in January, 1995, he was the
founding principal of Tozai Strategists, a consulting company specializing
in Asian market development. Previously, Mr. Dur served as President and
Chief Executive Officer for both Gilbey Canada, Inc. and Heublein Japan
from 1990 to 1994 and from 1981 to 1989, respectively, both of which are
indirect subsidiaries of Grand Metropolitan plc.
Bruce H. Wyatt 49 Vice President and
General Counsel 9/07/88
Clerk and Secretary 4/28/88
Prior to Mr. Wyatt's elections as Vice President and General Counsel,
and Clerk and Secretary, he served as Assistant General Counsel from April,
1985, Assistant Clerk from April, 1983, and Assistant Secretary from April,
1981.
Ronald R. Jalbert 57 Vice President 8/29/79
Mr. Jalbert joined the Company in August, 1979 as its Vice President
of Personnel and from April, 1982 until January, 1995 he served as Vice
President, Human Resources and Public Affairs. Since January, 1995, he has
served as Vice President, Human Resources.
Thomas E. Evangelista 46 Vice President 12/07/88
Prior to Mr. Evangelista joining the Company in December, 1988, he
was a Marketing Consultant for Marketing Corporation of America in
Westport, Connecticut where he focused on business development strategies
primarily for consumer products and services clients. From December, 1988
until January, 1995 he served as Vice President, Strategic Planning and
Development. Since January, 1995, he has served as Vice President,
Corporate Development and Communications.
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Carmen J. Mascaro 60 Treasurer 2/01/93
Prior to Mr. Mascaro's election as Treasurer, he served as Assistant
Treasurer from January, 1986 to February, 1993.
NOTE: All officers are elected for the ensuing year and until their
successors are duly elected and qualified.
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P A R T II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
Information required by this item is set forth in the Section
entitled "Stock Market, Dividend and Shareholder Information" appearing on
page 1 of the 1995 Annual Report to Stockholders, and is incorporated
herein by reference.
ITEM 6. SELECTED FINANCIAL DATA.
Information required by this item is set forth in the Section
entitled "Financial Highlights Last Ten Years" appearing on pages 52 and
53 of the 1995 Annual Report to Stockholders, and is incorporated herein
by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION.
Information required by this item is set forth in the Section
entitled "Management's Discussion and Analysis of Financial Condition and
Results of Operations" appearing on pages 21 through 28 of the 1995 Annual
Report to Stockholders, and is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Information required by this item is set forth in the Financial
Statements together with Notes and the Report of Independent Public
Accountants appearing on pages 30 through 51 of the 1995 Annual Report to
Stockholders, and is incorporated herein by reference. Also incorporated
herein by reference are the Quarterly results (unaudited) during 1995,
1994 and 1993 set forth on page 29 of the 1995 Annual Report to
Stockholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
P A R T III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information required by this item regarding the directors of the
Company is set forth under the captions "Election of Directors" and
"Information as to Board of Directors and Nominees" in the Company's proxy
statement dated March 15, 1996, and is incorporated herein by reference.
Information required by this item regarding the executive officers of the
Company is included under a separate caption in Part I hereof, and is
incorporated herein by reference, in accordance with General Instruction
G(3) of Form 10-K and Instruction 3 to Item 401(b) of Regulation S-K.
-10-
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION.
Information required by this item is set forth under the captions
"Executive Compensation", "Compensation and Stock Option Committee Report
on Executive Compensation", "Performance Graph", and "Remuneration of Non-
Employee Directors" in the Company's proxy statement dated March 15, 1996,
and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information required by this item is set forth under the caption
"Voting Securities and Principal Holders Thereof" in the Company's proxy
statement dated March 15, 1996, and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information required by this item is set forth under the captions
"Compensation Committee Interlocks and Insider Participation" and "Certain
Relationships and Related Transactions" in the Company's proxy statement
dated March 15, 1996, and is incorporated herein by reference.
P A R T IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(1) and (2) Financial Statements and Schedules. The financial
statements and schedules required by this item are listed in the Index to
Financial Statements and Schedules of Stanhome Inc. on page 14 of this Form
10-K.
(a)(3) Exhibits. The exhibits required by this item are listed in
the Exhibit Index on pages 17 - 18 of this Form 10-K. The management
contracts and compensatory plans or arrangements required to be filed as an
exhibit to this Form 10-K are listed as Exhibits 10(a) to 10(s) in the
Exhibit Index.
(b) Reports on Form 8-K. No reports on Form 8-K were filed by the
Company during the fourth quarter of 1995.
-11-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized, on the
26th day of March, 1996.
STANHOME INC.
(Registrant)
By:/s/G. William Seawright
G. William Seawright
President and Chief Executive Officer
By:/s/Allan Keirstead
Allan G. Keirstead
Executive Vice President,
Chief Administrative & Financial Officer
-12-
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below on the 26th day of March, 1996 by the
following persons on behalf of the registrant and in the capacities
indicated.
Signature Title
/s/H. L. Tower *
H. L. Tower Director
/s/Homer G. Perkins *
Homer G. Perkins Director
/s/Allan Keirstead
Allan G. Keirstead Director, Executive Vice
President, and Chief
Administrative & Financial
Officer
/s/John F. Cauley, Jr. *
John F. Cauley, Jr. Director
/s/G. William Seawright
G. William Seawright Director, President, and
Chief Executive Officer
/s/Thomas R. Horton *
Thomas R. Horton Director
/s/Anne-Lee Verville *
Anne-Lee Verville Director
/s/Judith R. Haberkorn *
Judith R. Haberkorn Director
/s/Janet M. Clarke *
Janet M. Clarke Director
/s/Charles W. Elliott *
Charles W. Elliott Director
*By:/s/G. William Seawright
G. William Seawright
Attorney-In-Fact
-13-
<PAGE>
STANHOME INC.
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS - Incorporated herein by
reference to "Report of Independent Public Accountants" on page 51
of Stanhome's 1995 Annual Report to Stockholders.
FINANCIAL STATEMENTS - All of which are incorporated herein by reference
to Stanhome's 1995 Annual Report to Stockholders.
Consolidated Balance Sheet - December 31, 1995 and 1994
Consolidated Statement of Income For the Years Ended December
31, 1995, 1994 and 1993
Consolidated Statement of Retained Earnings For the Years Ended
December 31, 1995, 1994 and 1993
Consolidated Statement of Cash Flows For the Years Ended December
31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements - December 31, 1995,
1994 and 1993
Quarterly results (unaudited)
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
SCHEDULE SUPPORTING FINANCIAL STATEMENTS:
<TABLE>
<CAPTION>
Schedule
Number Description
<S> <C>
II Valuation and Qualifying Accounts and Reserves For
the Three Years Ended December 31, 1995
</TABLE>
NOTES:
(a) All other schedules are not submitted because they are not
applicable, not required or because the required information is
included in the consolidated financial statements or notes
thereto.
(b) Individual financial statements of the Company have been
omitted since (1) consolidated statements of the Company and
its subsidiaries are filed and (2) the Company is primarily an
operating company and all subsidiaries included in the
consolidated financial statements filed are wholly-owned and do
not have a material amount of debt to outside persons.
-14-
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
----------------------------------------------------
To Stanhome Inc.:
We have audited in accordance with generally accepted auditing
standards, the financial statements included in Stanhome Inc.'s annual
report to shareholders incorporated by reference in this Form 10-K, and
have issued our report thereon dated February 22, 1996. Our audit was made
for the purpose of forming an opinion on those statements taken as a whole.
The schedule listed in the accompanying index is the responsibility of the
Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in
our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial
statements taken as a whole.
/s/ Arthur Andersen LLP
Hartford, Connecticut
February 22, 1996
-15-
<PAGE>
SCHEDULE II
STANHOME INC.
-------------
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
----------------------------------------------
FOR THE THREE YEARS ENDED DECEMBER 31, 1995
--------------------------------------------
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
Additions
--------------------------
Balance at Charged to Charged to Balance at
Beginning Costs and Other End of
Description of Period Expenses Accounts Deductions Period
----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
For the year ended December 31, 1993
- ------------------------------------
Reserves which are deducted in the
balance sheet from assets to which
they apply -
Reserves for uncollectible
accounts, returns and allowances $12,404,951 $11,007,941(b) $ - $ 7,682,367(b) $15,730,525
=========== =========== ======== =========== ===========
Accumulated amortization of
other assets $16,882,932 $ 2,285,245 $ - $ 55,335 $19,112,842
=========== =========== ======== =========== ===========
Other reserves $ 576,998 $ 627,416
=========== ===========
For the year ended December 31, 1994
- ------------------------------------
Reserves which are deducted in the
balance sheet from assets to which
they apply -
Reserves for uncollectible
accounts, returns and allowances $15,730,525 $17,887,421(b) $200,619(a) $18,569,751(b) $15,248,814
=========== =========== ======== =========== ===========
Accumulated amortization of
other assets $19,112,842 $ 2,782,503 $ - $ 56,984 $21,838,361
=========== =========== ======== =========== ===========
Other reserves $ 627,416 $ 548,594
=========== ===========
For the year ended December 31, 1995
- ------------------------------------
Reserves which are deducted in the
balance sheet from assets to which
they apply -
Reserves for uncollectible
accounts, returns and allowances $15,248,814 $24,375,167 $ - $18,883,384 $20,740,597
=========== =========== ======== =========== ===========
Accumulated amortization of
other assets $21,838,361 $ 4,201,643 $ - $ 43,356 $25,996,648
=========== =========== ======== =========== ===========
Other reserves $ 548,594 $ 606,192
=========== ===========
</TABLE>
Note:
(a) Represents recorded reserves at dates of acquisitions.
(b) Revised to include returns and allowances.
-16-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
Reg. S-K
Item 601 EXHIBIT
<S> <C>
3(a)* Restated Articles of Organization as amended. (Exhibit 3
to Form 10-Q filed for the period ended March 31, 1988.)
3(b)* By-Laws as amended. (Exhibit 3(ii) to Form 10-Q filed
for the period ended March 31, 1994.)
4(a)* Rights Agreement dated as of September 7, 1988, between
Stanhome Inc. and The Connecticut Bank and Trust Company,
N.A. as amended. (Exhibit 4(a) to Form 10-Q filed for
the period ended September 30, 1988 and Exhibit 1 to Form
8-K filed on October 1, 1990.)
10(a)* 1984 Stock Option Plan, as amended and restated through
March 1, 1995. (Exhibit 10(a) to Form 10-K filed for the
period ended December 31, 1994.)
10(b)* 1991 Stock Option Plan, as amended and restated through
March 1, 1995. (Exhibit 10(b) to Form 10-K filed for the
period ended December 31, 1994.)
10(c)* Special Interim Chief Executive Officer Stock Option
Plan. (Exhibit 10(c) to Form 10-K filed for the period
ended December 31, 1993.)
10(d)* Non-Employee Director Stock Plan. (Exhibit 10 to Form
10-Q filed for the period ended March 31, 1995.)
10(e)* Outline of Deferred Compensation Plan for Non-employee
Directors, as amended. (Exhibit 10(e) to Form 10-K filed
for the period ended December 31, 1988.)
10(f) Management Incentive Plan, as amended and restated
effective January 1, 1996.
10(g)* Employment Contract, as amended, with E. Freedman.
(Exhibit 10(e) and 10(i) to Form 10-K filed for the
periods ended December 31, 1983 and December 31, 1986
respectively, Exhibit 19(a) to Form 10-Q filed for the
period ended June 30, 1989, and Exhibit 19(e) to Form
10-K filed for the period ended December 31, 1992.)
10(h)* Employment Agreement with G. William Seawright. (Exhibit
10(h) to Form 10-K filed for the period ended December
31, 1993.)
10(i)* Retirement Agreement with G. William Seawright. (Exhibit
10(j) to Form 10-K filed for the period ended December
31, 1993.)
10(j)* Supplemental Retirement Plan, as amended, with Allan G.
Keirstead. (Exhibit 10(l) to Form 10-K filed for the
period ended December 31, 1994.)
-17-
<PAGE>
10(k)* Agreement under Supplemental Pension Plan, as amended,
with Ronald R. Jalbert. (Exhibit 10(n) to Form 10-K
filed for the period ended December 31, 1993.)
10(l)* Form of Severance Agreement. Similar agreements exist
with Allan G. Keirstead, Bruce H. Wyatt, Ronald R.
Jalbert, and Thomas E. Evangelista. (Exhibit 19(d) to
Form 10-K filed for the period ended December 31, 1992.)
10(m) Description of Severance Arrangement for John J. Dur.
10(n)* Form of Change in Control Agreement. Similar agreements
exist with Allan G. Keirstead, Bruce H. Wyatt, John J.
Dur, Michael W. Burgess, Ronald R. Jalbert, and Thomas E.
Evangelista. (Exhibit 19(c) to Form 10-K filed for the
period ended December 31, 1992.)
10(o)* Change in Control Agreement with G. William Seawright.
(Exhibit 10(r) to Form 10-K filed for the period ended
December 31, 1993.)
10(p)* Change in Control Agreement with certain corporate and
subsidiary executive officers and non-executive officers.
(Exhibit 19(c) to Form 10-K filed for the period ended
December 31, 1991.)
10(q)* Stanhome Inc. Supplemental Pension Plan effective May 1,
1994. (Exhibit 10(r) to Form 10-K filed for the period
ended December 31, 1994.)
10(r)* Stanhome Supplemental Investment Savings Plan effective
May 1, 1994. (Exhibit 10(s) to Form 10-K filed for the
period ended December 31, 1994.)
10(s)* Hamilton Supplemental Investment Savings Plan effective
April 1, 1994. (Exhibit 10(t) to Form 10-K filed for the
period ended December 31, 1994.)
10(t)* License Agreement between Precious Moments, Inc. and
Enesco Corporation. (Exhibit 10 to Form 10-Q filed for
the period ended June 30, 1993.)
13 Portions of the 1995 Annual Report to the Stockholders of
Stanhome Inc.
21 Subsidiaries of Stanhome Inc.
23 Consent of Arthur Andersen LLP
24 Power of Attorney
27 Financial Data Schedule
__________________________________________________
*Incorporated Herein By Reference
</TABLE>
-18-
<PAGE>
EXHIBIT 10(f)
STANHOME INC.
MANAGEMENT INCENTIVE PLAN (M.I.P.)
Amended and Restated January 1, 1996
I. PURPOSE
The Management Incentive Plan (M.I.P. or the Plan) is an annual
variable compensation plan designed to motivate Stanhome management to
achieve superior results. It directly links compensation with the
achievement of Company business objectives.
II. ELIGIBILITY
The M.I.P. is offered to executives who are in a position to have an
impact on the results of the business. This is normally defined as
executives in salary grades 15 and above.
Executives who are hired after the first of the year will be eligible
to participate in the Plan as follows:
1) Executives who are hired after the beginning of the year but prior to
June 30th are automatically eligible.
2) Executives who are hired after June 30th but prior to September 30th
may be eligible to participate in the M.I.P. if meaningful specific
objectives are quickly developed.
3) Executives who are hired after September 30th will not be eligible
for an M.I.P. award in that year.
The M.I.P. payout calculation will be based on the actual prorated
earnings for the year.
III. BONUS FORMULA
An executive's Annual Bonus is based on the following:
A. Individual Portion - 40% of Target Bonus
This portion consists of clearly stated and measurable specific
personal objectives that are developed and agreed to between
the executive and his or her supervisor.
B. Financial Portion - 60% of Target Bonus
This portion is based on performance of the Company, the Group
or the executive's principal business Unit, as applicable, and
in direct relation to the Annual Profit Plan. Performance
criteria will vary according to the particular business Unit.
In cases where an executive is in salary grade 18 and above and
has responsibilities that span business Units, the Financial
Portion will be split 45%/15% between the executive's principal
business Unit and his/her Group.
C. Leveraging & Payout
No leveraging, and no payout, will be earned for performance
below 90% of the Annual Profit Plan. Achievement of both
Individual and Financial Objectives is leveraged in accordance
with the following formula:
-1-
<PAGE>
% of Financial Plan Achieved % Award/Leverage
less than 90% No Award
90% 50% Financial + 100% Individual
100% 100% (Financial & Individual)
105% 125% (Financial & Individual)
115% 175% (Financial & Individual)
120% or more 200% (Financial & Individual)
IV. PLAN ADMINISTRATION
Financial Objectives
These objectives are developed from the Annual Profit Plan. Criteria
differ for Corporate executives and executives in operating groups.
Corporate executives are measured on the average of five factors:
Factor Weight
Sales 10%
Operating Income 20%
Earnings Per Share 25%
Return on Equity 25%
Cash Component 20%
Groups and particular business Units are measured on three factors:
Factor Weight
Sales 15%
Pre-tax Income* 70%
Cash Component 15%
*For the Worldwide Direct Selling Group and particular direct selling
business Units this measure is Operating Income.
Each factor in the series is weighted in order to arrive at a
composite number for the Financial Portion of the bonus formula. In no
event will a financial factor be given credit above the maximum leverage
(200% of Plan) or below the minimum leverage (50% of Plan).
Executives of business Units whose positions are in salary grade 18
and above will participate in the financial results of the executive's
principal business Unit and of the Group to which that Unit belongs. In
these cases the Financial Portion will be split among the results of the
Group (15%) and the executive's principal Unit (45%).
Income objectives include the "Partners for Profit" concept of
counting total Company "through profit" on inter-company transactions.
Individual Objectives
At the beginning of each year, the executive meets with his/her
supervisor to establish a series of four to six individual objectives that
are consistent with job responsibilities and with the Annual Profit Plan.
These objectives should represent important goals or projects that the
executive intends to accomplish during the year and that will be fully
challenging. Objectives should be measurable, with clear criteria
specified for evaluating their achievement at year end. Whenever possible,
at least one objective, equal to at least 10% of the total, should be
measurable in quantitative or financial terms.
Periodic Review
During the year, management/supervisors should review with the
executive his or her progress toward achieving each of the individual
objectives. This generally should take place following the release of the
-2-
<PAGE>
six and nine month earnings results. The management/supervisor should
provide information on how the Company, Group and business Unit are doing
in relation to planned goals and should review the status of individual
objectives. If a change in job responsibilities or business focus requires
a change in objectives, these must be approved by senior management of the
Group or the Company and the change clearly documented. In all cases, open
communication is essential to success of the M.I.P.
V. AWARD DETERMINATION
A. Criteria
- Individual Portion: At the beginning of the following
year, management reviews all results for the prior year
and arrives at a determination of the extent to which the
participants' individual objectives have been achieved.
- Financial Portion: Results are determined based upon the
Company's audited year-end financial statements compared to
the objectives established in the Annual Profit Plan. A
separate calculation is made for each of the applicable
financial criteria.
B. Calculation of Bonus Award
If Financial Results are equal to or greater than 100% of
Plan: The sum of Individual Portion achieved III(A) plus the
Financial Portion achieved III(B) is multiplied by the
leveraging formula outlined in III(C) to equal the TOTAL
BONUS AWARD.
If Financial Results are between 90% and 100% of Plan: There
is no leveraging or change to the Individual Portion achieved
and the Financial Portion achieved III(B) is reduced by the
leveraging formula outlined in III(C). TOTAL BONUS AWARD
equals the sum of III(A) and III(B X C).
If Financial Results are less than 90% of Plan: There is no
Bonus Award on either Financial or Individual Portions.
In order to be eligible for an award, an executive must be on
the payroll in good standing through the end of the calendar
year. Exceptions apply in the case of retirement or termina-
tion without cause prior to year end, approved leave of
absence, family or medical leave.
VI. APPROVALS
A. Individual Objectives: These require the approval of the
immediate supervisor and the respective Group President. CEO
approval is required for the first level of direct reports in
each Group. The Corporate Vice President, Human Resources will
review further levels.
B. Financial Objectives: Final numbers and calculations will be
prepared by the Corporate Finance Department and require approval
of the CEO.
C. Final Payment: All final bonus calculations and recommended pay-
ments are submitted to the Compensation and Stock Option
Committee of the Board of Directors for review and final approval
at the March Committee meeting.
-3-
<PAGE>
EXHIBIT 10(m)
JOHN J. DUR SEVERANCE ARRANGEMENT
John J. Dur has an agreement with the Company which provides for the
payment of either all or one-half of his then current base annual salary,
depending upon the circumstances of his termination of employment at that
time, in the event of his severance following the completion of his present
assignment.
<PAGE> EXHIBIT 13
<TABLE>
<CAPTION>
STANHOME INC.
Percentage
Increase
FINANCIAL HIGHLIGHTS 1994 1995 (Decrease)
(In millions, except per share amounts)
<S> <C> <C> <C>
Net sales $790 $830 5%
Operating profit 81 86 7%
Net income before taxes 81 76 (5%)
Net income after taxes 44 42 (5%)
Working capital 102 100 (2%)
Total assets 512 534 4%
Shareholders' equity 269 267 (1%)
Return on average shareholders' equity 17% 16%
Per share data:
Net income fully diluted $2.25 $2.22 (1%)
Dividends declared $1.03 $1.06 3%
Shareholders' equity at December 31 $14.07 $14.55 3%
Average number of shares fully diluted 19.54 18.90 (3%)
Number of shares outstanding at December 31 19.15 18.33 (4%)
</TABLE>
<TABLE>
<CAPTION>
SALES
In Million Dollars
(Graphic Material Omitted)
<S> <C> <C>
Year 1991 710
1992 744
1993 751
1994 790
1995 830
</TABLE>
<TABLE>
<CAPTION>
OPERATING PROFIT
In Million Dollars
(Graphic Material Omitted)
<S> <C> <C>
Year 1991 79
1992 83
1993 66
1994 81
1995 86
</TABLE>
<TABLE>
<CAPTION>
EARNINGS PER SHARE
FULLY DILUTED NET INCOME
In Dollars
(Graphic Material Omitted)
<S> <C> <C>
Year 1991 2.21
1992 2.32
1993 1.67
1994 2.25
1995 2.22
</TABLE>
<TABLE>
<CAPTION>
RETURN ON EQUITY
Percent
(Graphic Material Omitted)
<S> <C> <C>
Year 1991 20%
1992 19%
1993 13%
1994 17%
1995 16%
</TABLE>
<TABLE>
<CAPTION>
Stock Market, Dividend and Shareholder Information
1994
Market Price
------------
Quarter Dividend High Low
- -------------------------------------------
<S> <C> <C> <C>
First $.25 $37.00 $31.75
Second .25 35.88 32.38
Third .265 35.88 31.88
Fourth .265 34.63 28.75
</TABLE>
<TABLE>
<CAPTION>
1995
Market Price
------------
Quarter Dividend High Low
- -------------------------------------------
<S> <C> <C> <C>
First $.265 $31.50 $26.88
Second .265 33.00 27.13
Third .265 33.38 30.38
Fourth .265 32.38 28.50
</TABLE>
Stanhome's Common Stock is traded on the New York and Pacific stock
exchanges (Symbol: STH). The table shows, for the indicated periods,
dividends paid and the high and low price range. (Source: New York Stock
Exchange Composite Tape.) As of December 31, 1995, there were 3,527 record
holders of the Common Stock.
-1-
<PAGE>
Management's Discussion And Analysis Of Financial Condition
And Results Of Operations
Stanhome Inc.
The following discussion gives more depth on Stanhome's financial
condition and results of operations. You will probably find it helpful to
have first read the financial statements, accompanying notes and the financial
highlights of recent years.
Segment Sales and Operating Profit
- ----------------------------------
Giftware
- --------
1995 Compared with 1994
- -----------------------
Giftware Group sales increased 18% in 1995 due to new businesses acquired
in the fourth quarter 1994 and to continued unit volume growth from the
Precious Moments line in North America and the Cherished Teddies line
internationally. The new businesses accounted for 1% of the fourth quarter 2%
increase in sales and 8% of the full year 18% increase in sales. The Precious
Moments line represented 44.3% of 1995 sales compared to 44.8% in 1994 and the
Cherished Teddies line represented 14.4% of 1995 sales compared to 14.8% in
1994. Sales for 1995 in North America benefited from an expansion of the
Company's program of extended accounts receivable terms. This facilitated the
shipment of orders for available goods sooner in 1995 versus 1994. The
increased accounts receivable are not expected to have a material impact on
bad debts. Principally reflecting the impact of earlier shipments in 1995,
and an increase in order frequencies for collectible lines, the Group's
backlog of orders as of year-end 1995 was down approximately 16% or $15
million compared to 1994. International results increased and, including new
businesses, international sales represented 17% of 1995 sales compared to 12%
in 1994. Total Group operating profit increased for 1995 led by North America
and benefited from a lower percentage of selling, general and administrative
expenses (32.1% in 1995 versus 32.6% in 1994) principally due to the favorable
impact of the sales increase on fixed costs. Total Group cost of sales in
1995 increased to 52.1% of sales versus 51.9% in 1994 due principally to
product mix. The increased operating margins were partially reduced by low
margins from the new businesses. The fourth quarter Giftware percentage
increase in sales and operating profit was less than the nine months year-to-
date due to seasonality, timing of delivery of products from the Far East and
weaker general business conditions.
1994 Compared with 1993
- -----------------------
Giftware Group sales increased 14% in 1994 due to acquisitions of new
businesses and continued unit volume growth from the Precious Moments and
Cherished Teddies collectible lines. Sales recorded from new businesses
acquired during 1994 were $9 million. The total 1994 annual sales of the new
businesses acquired were $46 million. The Precious Moments line represented
45% of 1994 sales compared to 46% in 1993 and the Cherished Teddies line
represented 15% of sales in 1994 compared to 11% in 1993. International
operations represented 12% of sales in 1994 and 1993. Excluding the new
acquisitions, international sales declined due to significantly lower sales
from Australia. The Australian company was sold to a distributor in April
1994, and the close-out costs were provided for in the 1993 restructuring. In
1994, the Australian company recorded $.3 million in sales and no loss
compared to sales of $2.5 million and an operating loss of $1.1 million in
1993. Excluding Australia and the new acquisitions, international sales and
operating profit increased. Total Group operating profit increased for 1994
led by the United States and benefited from a lower percentage of selling,
general and administrative expenses principally due to the favorable impact of
-21-
<PAGE>
the sales increase on fixed costs combined with the benefits from the 1993
restructuring. The total benefits from the restructuring for 1994 improved
operating profit by approximately $2.2 million and the 1995 benefit was
approximately $.8 million. The impact of the new acquisitions during the 1994
fourth quarter reduced total operating profit due principally to the cost to
move and assimilate the Otagiri business into the Enesco U.S. operations and
the start-up costs to develop a separate sales force and marketing effort for
the new International Collections Division which will sell and market the new
acquisition lines in the U.S. These costs were the primary reason that 1994
fourth quarter operating profit increased at a lower rate than sales.
Direct Response
- ---------------
1995 Compared with 1994
- -----------------------
Direct Response Group sales increased 11% in very competitive market
conditions due principally to increased product offerings. International
sales and operating losses increased and international sales represented 10%
of total sales. Doll sales accounted for 30% of 1995 sales compared to 31% in
1994, while plate sales accounted for 40% of sales in 1995 compared to 51% in
1994. All other categories of sales, which are primarily figurines, increased
to 30% of sales in 1995 compared to 18% in 1994. The Precious Moments line
represented 11.6% of 1995 sales compared to 5.8% in 1994 and the Cherished
Teddies line represented 11.7% of 1995 sales compared to 6.2% in 1994. Market
conditions for the direct response businesses for the Company's products
continue to be soft and very competitive with many product offerings with a
lower success rate and ads going against weakness in consumer spending. Total
Group cost of sales increased to 32.6% of sales in 1995 compared to 30.8% in
1994 principally due to the costs associated with lower success rates for
product offerings. Selling, general and administrative expenses increased to
68.8% of sales in 1995 compared to 63.2% in 1994, reflecting the market
conditions. Advertising expense increased to 53% of sales in 1995 compared to
49% in 1994 due to reduced response rates to ads, a significantly lower
success rate for product introductions which have increased over 1994, and a
resistance by customers to higher prices. Additionally, product returns and
bad debts on installment billing programs have increased. Reflecting these
poor market conditions combined with expense increases in postage, paper and
advertising rates, and the cost to replace some members of the key management
team, the Group recorded an operating loss for the year.
1994 Compared with 1993
- -----------------------
Direct Response Group sales increased 4% in very competitive market
conditions due principally to unit volume increases in plates and figurines.
Doll sales decreased to 31% of sales in 1994 compared to 38% in 1993.
International sales decreased and operating losses increased. International
sales accounted for 9% of sales in 1994 compared to 10% in 1993. Total
operating profit benefited from a 1% decrease in cost of sales due to sales
mix. Selling, general and administrative expenses increased to 63% of sales
in 1994 compared to 60% in 1993 due to higher advertising expenses.
Advertising expense increased to 49% of sales versus 46% in 1993 due to lower
sales response rates in 1994 reflecting the very competitive market
conditions. Higher advertising expense was also the cause for the operating
margin decline for the fourth quarter.
-22-
<PAGE>
In the United States, sales taxes are only collected in those states
where Hamilton has a physical presence. Following a U.S. Supreme Court
decision supporting this principle, several states have increased efforts to
collect sales tax from their residents on out-of-state mail order purchases
and legislation has been introduced in the U.S. Senate to override the Supreme
Court's decision on this issue. If Hamilton had to collect sales taxes in all
states, it would result in increased administrative cost of doing business.
Direct Selling
- --------------
1995 Compared with 1994
- -----------------------
Comparable Direct Selling results for the fourth quarter and year
excluding the United States and Puerto Rico operations, which in 1995 have
been licensed to a third party, are as follows (in thousands):
Fourth Quarter w/o U.S. and Puerto Rico
---------------------------------------
1995 1994 % Change
---- ---- --------
Sales $ 58,841 $ 63,700 ( 8)
Operating Profit 7,932 8,558 ( 7)
Total Year w/o U.S. and Puerto Rico
-----------------------------------
1995 1994 % Change
---- ---- --------
Sales $192,429 $204,462 ( 6)
Operating Profit 21,006 24,032 (13)
The comparable 1995 operating margins decreased .9% versus 1994 primarily
from a higher percentage of selling, general and administrative expenses, due
to the impact of lower sales on fixed costs. The comparable cost of sales was
27.1% in 1995 versus 27.0% in 1994.
European sales decreased 5% for the fourth quarter and l% for the year
due to local currency declines, and represented 89% of total 1995 Direct
Selling sales. European operating profit due to higher selling, general and
administrative expenses decreased 8% for the year and represented 91% of total
Direct Selling operating profit for 1995. Lower sales and margins from Italy,
the Group's largest operation, was principally the cause of the lower total
results. Results from Italy for the past several years have been on a
downward trend. A principal cause has been the unfavorable impact on the
activity of the Italian independent Dealers of the previously reported tax
assessments made against them and resulting tax litigation with the Italian
government, and a higher tax burden in general. This tax burden and
anticipated new social benefit taxes effective for 1996 are expected to
continue to unfavorably impact the Company's independent Dealer force and its
ability to recruit and retain Dealers. European local currency sales and
operating profit translated at 1994 average exchange rates would have resulted
in a 6% sales decrease and an 11% operating profit decrease. Sales for the
Mexican and Venezuelan group decreased 30% for the quarter and 33% for the
year. Operating profit for this Group decreased 42% for the quarter and 51%
for the year. The decreases were primarily due to the Mexican Peso
devaluations during 1995, the Venezuelan Bolivar devaluation in December 1995,
and the resulting unfavorable local economic impacts. The United States and
Puerto Rico direct selling operations in 1995 have been licensed to a third
party. The assets of these businesses remaining to be disposed, not
transferred to that third party, have been and continue to be disposed. As of
December 31, 1995, these assets amounted to $2.0 million in inventories and
$l.0 million of net property, plant and equipment.
-23-
<PAGE>
1994 Compared with 1993
- -----------------------
Direct Selling Group sales for 1994 decreased 6% due to closed operations
from the restructuring program, sluggish European economies, unfavorable
foreign currency translation rates, and lower sales in the United States.
Excluding the 1993 restructuring of $13 million, operating profit decreased
11% due to the lower sales and higher selling and marketing expenses that did
not generate the expected sales results. Higher selling and marketing
expenses were also the cause of the operating profit margin decline during the
fourth quarter. Total year sales of operations that have been discontinued as
a result of the restructuring program were $.9 million in 1994 and $5 million
in 1993, and there were minor operating losses in 1994 compared to an
operating loss in 1993 of $1.8 million. In addition, the restructuring
program has resulted in cost reductions of approximately $4.4 million in 1994
compared to 1993, and the 1995 benefit was approximately $.8 million.
European Direct Selling sales, which represented 72% of the total Group
1994 sales, decreased 4% due to local currency declines, unfavorable currency
translation rates in 1994 compared to 1993, and discontinued operations in
Germany and Portugal which had 1993 sales of $1.1 million and operating losses
of $.9 million. Excluding the 1993 restructuring, operating profit decreased
4%. European local currency 1994 sales and operating profit translated at
1993 average exchange rates would have resulted in a 3% sales and operating
profit decrease. Excluding the restructuring impact for 1993 and 1994, the
operating profit percentage decline exceeded the sales decline due to
significantly higher levels of spending that did not generate the expected
sales results. The Company has previously reported that its Italian
subsidiary, Stanhome S.p.A., has been assisting its independent Dealers in the
defense of personal tax assessments made against them in connection with the
distribution of hostess gifts as part of the Stanhome Party Plan System, by
paying legal expenses, advancing amounts for tax deposits, or making
settlement payments where this is more cost effective than potential
litigation costs, so as to protect its Dealer force and its ability to recruit
and retain future Dealers. These payments have not been material. Stanhome
S.p.A. has received, during 1994, a favorable ruling from the Italian
government regarding certain tax consequences of the distribution of the
hostess gifts. This ruling should lead to a favorable resolution of the
ongoing Dealer tax litigation concerning these assessments. To the extent
necessary, the Italian subsidiary will continue to assist Dealers in the
defense of these assessments.
Latin American sales and operating profit increased due to unit volume
increases despite the maxi devaluations in Mexico and Venezuela during 1994.
Latin American sales and operating profit in 1994 represented 14% of Group
sales and 19% of operating profit.
Sales in 1994 for U.S. Direct Selling decreased 10% and the operating
loss increased to over $3 million, despite cost reductions resulting from the
restructuring program. Significantly higher spending did not generate sales
increases. Due to the disappointing results despite vigorous efforts to turn
the U.S. business around, the U.S. Direct Selling business, including Puerto
Rico, was closed in 1995 and the Stanley Home Products brand name was licensed
in the United States, Puerto Rico and Canada. Sales and operating losses for
the business in 1994 were $36 million and $3.5 million, respectively. The
severance and other exit costs approximated $6 million, and are being offset
by gains on the sale of assets of the business.
-24-
<PAGE>
UNALLOCATED EXPENSES decreased compared to 1994 principally due to a 1994
$3.5 million charge for contract obligations for officers leaving the Company.
However, compensation, benefits and general expenses have increased consistent
with the Company's programs. Unallocated expenses are corporate expenses and
other items not related to the operations of the Groups.
Interest Expense and Other Income, Net
- --------------------------------------
Net interest expense in 1995 increased due to higher borrowing levels
principally for the 1994 acquisitions and the stock buyback program. Other
assets amortization of goodwill increased due to the impact from the 1994
acquisitions. The amortization for Giftware in 1995 was $3.5 million compared
to $2.1 million in 1994 and the amortization for Direct Response was $.7
million in 1995 and $.7 million in 1994.
Interest expense in 1994 increased for the fourth quarter and year due to
international borrowings for acquisitions during the fourth quarter. Interest
income decreased in 1994 due to lower levels of investments. Other income,
net for 1994 included gains on the sale of assets principally from the sales
of the Company's Direct Selling Zanesville, Ohio Customer Care Center in the
first quarter and Puerto Rico Distribution Center in the third quarter. The
amortization of goodwill increased due to the impact from the fourth quarter
acquisitions.
Income Taxes
- ------------
The effective tax rate for 1995 of 45% was the same as 1994 despite
international rate increases and higher non deductible goodwill amortization
in 1995. This was due principally to earnings mix with a lower ratio of
foreign income to United States income, which has a lower rate. The effective
tax rate for 1994 was lower than 1993, excluding the impact of the
restructuring charge, due to a favorable earnings mix with a lower ratio of
foreign income to United States income, which has a lower rate.
The effective tax rate for 1993 increased to 50% due to the impact of the
restructuring charge. The tax benefit of $5.5 million, or 32% of the $17
million restructuring charge, was limited by the inability to fully receive
tax benefits for all of the charges in certain international locations.
Excluding the restructuring charge, the effective tax rate was 46%, the same
as 1992. Increased statutory rates in 1993 for the United States and
international were offset by a favorable earnings mix with a higher ratio of
United States income which has a lower rate.
Inflation, Changing Prices and Economic Conditions
- --------------------------------------------------
Although the Company's operations are affected by general economic
trends, inflation and changing prices did not have a material impact on 1995
and 1994 results compared to prior years for operations in Europe and North
America. Operations in Venezuela and Mexico have experienced highly
inflationary economies with rapidly changing prices in local currencies.
These conditions, with the resulting adverse impact on local economies, have
made it difficult for operations in these locations to achieve adequate
operating margins. In addition, the strengthening of the dollar versus Latin
American currencies has resulted in lower U.S. dollar results for these
-25-
<PAGE>
operations. European operations were favorably impacted by translation rates
in total for 1995. European operations were not significantly impacted by
translation rates in 1994 compared to 1993. The value of the U.S. dollar
versus international currencies where the Company conducts business will
continue to impact the future results of these businesses. In addition to the
currency risks, the Company's international operations, including
sources of imported products, are subject to the risks of doing business
abroad including import or export restrictions and changes in economic and
political climates. The fluctuations in net sales and operating profit
margins from quarter to quarter are partially due to the seasonal
characteristics of the Company's business segments.
Financial Condition
- -------------------
The Company has historically satisfied its capital requirements with
internally generated funds and short-term loans. Working capital requirements
fluctuate during the year and are generally greatest during the third quarter
and lowest at the beginning of the first quarter.
The major sources of funds from operating activities were from net
income, depreciation, and amortization. The major uses were increased
accounts receivable which increased 13% due to higher sales volumes and
marketing programs including the expansion of the Company's Giftware program
of extended accounts receivable terms and a higher level of Direct Response
products sold on credit. The allowance for losses on accounts receivable
increased in 1995 reflecting higher provisions for bad debts and returns on
the increased accounts receivable. The allowance for losses on accounts
receivable decreased in 1994 primarily due to the deletion of non-paying
accounts sooner in 1994 compared to 1993. Extended credit terms to customers
has been a very effective means to improve service and increase sales and
profits and will continue to be utilized in the future. Inventories decreased
in 1995 due to lower levels of remaining inventory for the United States
Direct Selling business which was licensed to a third party in 1995. The
remaining inventory of approximately $2.0 million, net will be sold in 1996.
Inventories increased 22% in 1994 due to the inventories of businesses
acquired, to support the higher level of sales, product mix in Giftware and
lower than expected sales from Direct Selling. Prepaid expenses in 1995 were
at the same level as 1994 which reflected product mix and the slower growth
rate in the Direct Response business. Prepaid expense increased 30% in 1994
due to higher advertising in support of sales growth for the Direct Response
Group. The increase in other assets in 1995 reflects higher levels of funded
retirement benefits. Long-term liabilities increased due to higher provisions
for retirement benefits. Total current liabilities excluding short-term debt
decreased 8% compared to 1994 due to the payment of severance and termination
benefits, lower liabilities from the U.S. and Puerto Rico businesses, and
timing differences of payments, principally taxes, versus 1994. Total current
liabilities excluding short-term debt increased 17% in 1994 due principally to
the liabilities of the businesses acquired, higher level of sales, and timing
difference of payments versus 1993.
The major uses of cash in investing activities for 1995 were for capital
expenditures and payments related to the 1994 acquisition liabilities. The
major use of cash in investing activities for 1994 was for the acquisition of
businesses which included $9.5 million for the final earn out payment for The
Hamilton Group Limited, Inc. All of the acquisitions were accounted for using
the purchase method. The allocation to goodwill in 1994 from acquisitions was
$63 million and is being amortized on a straight-line basis over forty years.
-26-
<PAGE>
The assets of the three businesses acquired were accounts receivable $10.7
million, inventories $6.2 million, property, plant and equipment $4.8 million
and other $.4 million. The sources of funds for all expenditures were from
cash and investments, and short-term loans. Capital expenditures of $19
million are planned for 1996. The Company has an acquisition program and may
utilize funds for this purpose in the future. Proceeds from the sales of
property, plant and equipment were primarily from sales in the United States
of assets of businesses licensed to a third party in 1995. As of December 31,
1995, three distribution facilities, with a net book value of $1.0 million,
remained to be sold in the United States. Marketable securities have
principally consisted of Italian treasury bills and commercial paper. The
Italian subsidiary invests excess cash in short-term investments which change
from time to time based on availability and rates. The level of changes of
marketable securities among the years principally represents investment
alternatives versus certificates of deposit and time deposits.
The major use of cash in financing activities was for dividends to
shareholders and purchases of common stock. Purchases of common stock
included shares repurchased by the Company and shares received from optionees
to pay for the exercise price of options. Note 4 to the Financial Statements
provides a detailed summary of treasury stock activity. The Company has an
authorized program to purchase shares of common stock for the Company treasury
from time to time in the open market, depending on market and business
conditions, and may utilize funds for this purpose in the future. As of
December 31, 1995, 1.3 million shares remained available for purchase under
the program. The Company's earnings, cash flow, and available debt capacity
have made and make stock repurchases, in the Company's view, one of its best
investment alternatives. A major source of funds from financing activities
continued to be from the exercise of stock options. Total stock options
outstanding at the exercise price amounted to $80 million at December 31, 1995
and the Company could receive these funds in the future if the options are
exercised.
Annually, the Company makes provisions to record its obligation to pay,
in the future, insurance premiums for postretirement benefits to eligible
employees, and severance allowances to eligible employees of certain foreign
subsidiaries upon their voluntary or involuntary separation. These
obligations are not funded because there is not a financial benefit to fund
them.
In August 1995 the Company entered into a five year $200 million
multicurrency revolving credit agreement with various banks which can be used
for working capital, investing and financing activities. The agreement has an
annual facility and agency fee as well as a margin supplement for Eurocurrency
rate loans where more than one third of the commitment is utilized. The
agreement contains financial covenants that include requirements, as defined,
for minimum net worth, interest coverage and maximum borrowings. None of
these covenants is expected to have an adverse effect on the Company's ability
to operate in the future. The Company currently believes that funds from
operations and available financing alternatives are adequate to meet
anticipated requirements for working capital, dividends, capital expenditures,
the stock repurchase program and other needs. No liquidity problems are
anticipated.
-27-
<PAGE>
Fluctuations in the value of the U.S. dollar versus international
currencies affect the U.S. dollar translation value of international currency
denominated balance sheet items. The changes in the balance sheet dollar
values due to international currency translation fluctuations are recorded as
a component of shareholders' equity. International currency fluctuations of
$.3 million for 1995 reduced the cumulative translation component which
reduced the shareholders' equity decrease in 1995. The translation
adjustments to the December 31, 1995 balance sheet that produced the 1995
change in the cumulative translation component of shareholders' equity were an
increase in working capital by $.4 million; an increase in net property, plant
and equipment and other assets by $.2 million; and in long-term liabilities by
$.3 million. The Company depends upon its international operations to pay
dividends and to make other payments to the Company. The Company's
international operations are subject to the risks of doing business abroad
including currency, economic and political.
-28-
<PAGE>
Quarterly results (unaudited):
- ------------------------------
(In thousands, except per share amounts)
Stanhome Inc.
The following table sets forth information with respect to the
consolidated quarterly results of operations for 1995, 1994 and 1993. The
amounts are unaudited, but in the opinion of management include all
adjustments necessary to present fairly the results of operations for the
periods indicated.
For the Three Months Ended
---------------------------------------------
March 31, June 30, Sept. 30, Dec. 3l,
1995 1995 1995 1995
-------- -------- -------- --------
Net sales................... $184,869 $209,490 $205,706 $230,124
Cost of sales............... 77,426 88,568 92,268 95,622
-------- -------- -------- --------
Gross profit................ 107,443 120,922 113,438 134,502
Selling, general and
administrative expense.... 93,673 97,920 90,038 108,178
-------- -------- -------- --------
Operating profit............ $ 13,770 $ 23,002 $ 23,400 $ 26,324
======== ======== ======== ========
Net income.................. $ 6,450 $ 11,169 $ 11,868 $ 12,413
======== ======== ======== ========
Earnings per common share:
Primary and fully diluted. $ .34 $ .59 $ .63 $ .67
======== ======== ======== ========
For the Three Months Ended
---------------------------------------------
March 31, June 30, Sept. 30, Dec. 3l,
1994 1994 1994 1994
-------- -------- -------- --------
Net sales................... $171,769 $188,592 $193,255 $236,560
Cost of sales............... 69,806 74,486 85,032 95,664
-------- -------- -------- --------
Gross profit................ 101,963 114,106 108,223 140,896
Selling, general and
administrative expense.... 86,983 93,272 86,245 118,136
-------- -------- -------- --------
Operating profit............ $ 14,980 $ 20,834 $ 21,978 $ 22,760
======== ======== ======== ========
Net income.................. $ 8,133 $ 11,608 $ 13,117 $ 11,198
======== ======== ======== ========
Earnings per common share:
Primary and fully diluted. $ .41 $ .59 $ .67 $ .58
======== ======== ======== ========
For the Three Months Ended
---------------------------------------------
March 31, June 30, Sept. 30, Dec. 3l,
1993 1993 1993 1993
-------- -------- -------- --------
Net sales................... $164,490 $187,236 $182,481 $216,456
Cost of sales............... 65,200 72,871 77,698 88,891
-------- -------- -------- --------
Gross profit................ 99,290 114,365 104,783 127,565
Selling, general and
administrative expense.... 87,407 95,646 83,354 97,044
Restructuring............... - 17,000 - -
-------- -------- -------- --------
Operating profit............ $ 11,883 $ 1,719 $ 21,429 $ 30,521
======== ======== ======== ========
Net income.................. $ 6,267 ($ 1,223) $ 11,900 $ 16,189
======== ======== ======== ========
Earnings per common share:
Primary and fully diluted. $ .31 ($ .06) $ .60 $ .83
======== ======== ======== ========
-29-
<PAGE>
CONSOLIDATED BALANCE SHEET
December 31, 1995 and 1994
STANHOME INC.
<TABLE>
<CAPTION>
ASSETS
1995 1994
---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash (including interest bearing
demand deposits)........................ $ 18,144,308 $ 14,027,093
Certificates of deposit and time deposits. 4,909,618 5,324,746
Notes and accounts receivable, net........ 158,572,959 140,696,603
Inventories............................... 114,294,928 116,015,060
Prepaid advertising....................... 39,665,306 40,099,913
Other prepaid expenses.................... 6,784,465 6,513,723
------------ ------------
Total current assets............ 342,371,584 322,677,138
------------ ------------
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land and improvements..................... 6,891,746 6,802,354
Buildings and improvements................ 56,968,647 53,263,633
Machinery and equipment................... 26,923,110 26,445,094
Furniture and fixtures.................... 37,219,499 34,893,535
Transportation equipment.................. 3,792,139 4,591,010
------------ ------------
131,795,141 125,995,626
Less - Accumulated depreciation
and amortization................... 70,947,871 68,036,607
------------ ------------
60,847,270 57,959,019
------------ ------------
OTHER ASSETS:
Goodwill and other intangibles, net....... 119,826,382 121,586,984
Other..................................... 11,420,987 9,899,491
------------ ------------
131,247,369 131,486,475
------------ ------------
$534,466,223 $512,122,632
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-30-
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
1995 1994
---- ----
<S> <C> <C>
CURRENT LIABILITIES:
Notes and loans payable................... $ 74,864,065 $ 39,022,890
Accounts payable.......................... 64,880,028 63,072,000
Federal, state and
foreign taxes on income................. 28,758,277 37,062,510
Accrued expenses -
Payroll and commissions................. 13,658,026 17,423,516
Pensions and profit sharing............. 8,610,616 9,055,259
Royalties............................... 8,587,986 7,974,606
Vacation, sick and
postretirement benefits............... 6,979,623 9,435,495
Other................................... 36,106,020 37,171,244
------------ ------------
Total current liabilities........ 242,444,641 220,217,520
------------ ------------
LONG-TERM LIABILITIES:
Foreign employee severance obligations.... 12,482,097 13,207,097
Postretirement benefits................... 12,749,258 9,302,239
------------ ------------
Total long-term liabilities...... 25,231,355 22,509,336
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 12)
SHAREHOLDERS' EQUITY:
Common stock, par value $.125--
Authorized 80,000,000 shares
Issued 25,228,240 shares................ 3,153,530 3,153,530
Capital in excess of par value............ 43,098,856 37,376,690
Retained earnings......................... 385,008,394 362,946,840
Cumulative translation adjustments........ ( 27,409,482) ( 27,660,727)
------------ ------------
403,851,298 375,816,333
Less - Shares held in treasury, at cost-
Common stock, 6,897,901 shares in
1995 and 6,077,397 in 1994............ 137,061,071 106,420,557
------------ ------------
Total shareholders' equity....... 266,790,227 269,395,776
------------ ------------
$534,466,223 $512,122,632
============ ============
</TABLE>
-31-
<PAGE>
CONSOLIDATED STATEMENT OF INCOME
For the Years Ended December 31, 1995, 1994 and 1993
STANHOME INC.
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
NET SALES.................... $830,189,446 $790,176,497 $750,662,776
COST OF SALES................ 353,884,092 324,988,902 304,659,476
------------ ------------ ------------
GROSS PROFIT................. 476,305,354 465,187,595 446,003,300
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSE..... 389,809,785 384,635,879 363,451,535
RESTRUCTURING CHARGE......... - - 17,000,000
------------ ------------ ------------
OPERATING PROFIT............. 86,495,569 80,551,716 65,551,765
Interest expense........... ( 7,751,347) ( 2,019,272) ( 2,010,964)
Other income (expense), net ( 2,405,707) 2,206,760 2,598,911
------------ ------------ ------------
INCOME BEFORE INCOME TAXES... 76,338,515 80,739,204 66,139,712
Income taxes............... 34,438,941 36,683,643 33,007,035
------------ ------------ ------------
NET INCOME................... $ 41,899,574 $ 44,055,561 $ 33,132,677
============ ============ ============
EARNINGS PER COMMON SHARE:
Primary.................... $ 2.22 $ 2.26 $ 1.68
Fully diluted.............. $ 2.22 $ 2.25 $ 1.67
</TABLE>
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
For the Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
<S> <C> <C> <C>
BALANCE, beginning of year... $362,946,840 $338,753,939 $325,241,068
Net income................. 41,899,574 44,055,561 33,132,677
Cash dividends, $1.06
per share in 1995, $1.03
per share in 1994 and
$1.00 per share in 1993... ( 19,838,020) ( 19,862,660) ( 19,619,806)
------------ ------------ ------------
BALANCE, end of year......... $385,008,394 $362,946,840 $338,753,939
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-32-
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Years Ended December 31, 1995, 1994 and 1993
STANHOME INC.
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income..................... $41,899,574 $44,055,561 $33,132,677
Adjustments to reconcile net
income to netcash provided by
operating activities:
Depreciation and amortization
of property, plant
and equipment..... 8,937,501 7,657,414 8,354,026
Allowance for losses on
accounts receivable......... 5,491,783 ( 481,711) 3,325,574
Amortization of other assets. 4,201,643 2,782,503 2,285,245
(Gains)/losses on sale of
capital assets.............. 177,856 ( 1,270,990) ( 14,042)
Changes in assets and
liabilities, net of effects
from acquisition
of businesses:
Notes and
accounts receivable....... ( 22,316,617) ( 5,967,513) ( 22,606,637)
Inventories................ 2,213,590 ( 14,922,629) 21,845,489
Prepaid expenses........... 263,199 ( 10,422,429) ( 7,446,253)
Other assets............... ( 1,820,831) ( 603,181) ( 708,612)
Accounts payable and
accrued expenses.......... ( 10,101,632) 9,596,362 20,834,829
Taxes on income............ ( 8,268,815) 14,774,597 ( 435,117)
Foreign employee
severance obligations..... ( 1,000,530) ( 185,798) 3,650
Long-term postretirement
benefits.................. 3,447,019 1,859,895 728,405
----------- ----------- -----------
Net cash provided by
operating activities.......... 23,123,740 46,872,081 59,299,234
----------- ----------- -----------
INVESTING ACTIVITIES:
Purchase of property, plant
and equipment................. ( 13,464,138) ( 16,755,519) ( 6,511,449)
Payments for acquisition of
businesses, net of
cash acquired................. ( 1,860,670) ( 78,674,108) ( 199,858)
Proceeds from sales of
property, plant
and equipment................. 4,100,911 4,022,600 572,110
Other, principally
marketable securities......... ( 3,072) 7,816,024 ( 811)
----------- ----------- -----------
Net cash used by investing
activities.................... ( 11,226,969) ( 83,591,003) ( 6,140,008)
----------- ----------- -----------
FINANCING ACTIVITIES:
Cash dividends................. ( 19,838,020) ( 19,862,660) ( 19,619,806)
Exchanges and purchases
of common stock............... ( 31,648,862) ( 12,884,838) ( 12,232,407)
Notes and loans payable........ 36,533,007 31,647,562 ( 260,780)
Exercise of stock options...... 6,314,736 3,668,231 870,676
Other common stock issuance.... 415,778 308,849 327,144
----------- ----------- -----------
Net cash provided/(used) by
financing activities.......... ( 8,223,361) 2,877,144 ( 30,915,173)
----------- ----------- -----------
Effect of exchange rate
changes on cash and
cash equivalents.............. 28,677 ( 142,137) ( 2,703,535)
----------- ----------- -----------
Increase/(decrease) in cash
and cash equivalents.......... 3,702,087 ( 33,983,915) 19,540,518
Cash and cash equivalents,
beginning of year............. 19,349,839 53,333,754 33,793,236
----------- ----------- -----------
Cash and cash equivalents,
end of year................... $23,051,926 $19,349,839 $53,333,754
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-33-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
1. ACCOUNTING POLICIES:
-------------------
The accompanying consolidated financial statements include the accounts
of Stanhome Inc. and its subsidiaries (the "Company"). All significant
intercompany transactions have been eliminated in the consolidated financial
statements. The preparation of financial statements in conformity with
generally accepted accounting principles requires the use of Management's
estimates. Actual results could differ from those estimates. Certain
reclassifications have been made in the 1994 and 1993 financial statements to
conform to the 1995 presentation.
Assets and liabilities of the Company's foreign subsidiaries, other than
those located in highly inflationary countries, are translated at the exchange
rate on the balance sheet date, while statement of income items are translated
at the average exchange rates for the year. Translation gains and losses are
reported as a component of shareholders' equity. Transaction gains and losses
are reported in the statement of income. For foreign subsidiaries in highly
inflationary countries, a combination of current and historical rates is used
to determine foreign currency gains and losses resulting from financial
statement translation. These gains or losses are reported directly in the
statements of income.
The carrying amount of cash and certificates of deposit and notes and
loans payable approximate fair value.
The Company considers all highly liquid securities, including
certificates of deposit, with maturities of three months or less, when
purchased, to be cash equivalents, except for $2,000 of deposits in 1995 and
1994, respectively, with terms in excess of three months.
The Company recognizes revenue as merchandise is turned over to the
shipper and a provision for anticipated merchandise returns and allowances is
recorded based upon historical experience. Amounts billed to customers for
shipping and handling orders are netted against the associated costs. Sales
by certain International direct selling subsidiaries are transacted at retail
prices. However, these sales are reflected in the consolidated financial
statements at equivalent wholesale selling prices.
Notes and accounts receivable were net of reserves for uncollectible
accounts, returns and allowances of $20,741,000 and $15,249,000 at December
31, 1995 and 1994, respectively.
Inventories are valued at the lower of cost or market. Cost components
include labor, manufacturing overhead and amounts paid to suppliers of
materials and products. The Company values raw materials and certain
manufactured and purchased items in the United States and Italy utilizing the
last-in, first-out method while the first-in, first-out method is used for
substantially all other inventories. The cost on a first-in, first-out basis
over the carrying amount of inventories as reflected in the accompanying
consolidated balance sheet was $783,000 and $1,971,000 at December 31, 1995
and 1994, respectively.
-34-
<PAGE>
The major classes of inventories were as follows (in thousands):
1995 1994
---- ----
Raw materials and supplies........... $ 7,312 $ 7,071
Work in process...................... 1,237 818
Finished goods in transit............ 16,215 9,949
Finished goods....................... 89,531 98,177
-------- --------
$114,295 $116,015
======== ========
The Company incurs prepaid advertising expense in connection with the
marketing of certain of its direct response products. Such expense is
amortized over the estimated life of the associated product programs which is
generally one year. Management periodically evaluates the estimated lives
used to amortize the prepaid advertising costs and adjusts the lives
accordingly.
Concentration of risk for the Company exists in revenue from major
product lines, particularly in the Giftware segment, sources of supply of
inventory, markets and geographic areas, and trade receivables. The majority
of product sales for the Giftware and Direct Response Groups are under
licensed rights from third parties. The two largest licensed lines
represented approximately 39% of the Company's total sales for 1995. A large
portion of acquired inventory is sourced from the Far East, principally China.
A significant portion of the Company's operations is located in Europe. The
Giftware and Direct Response segments offer extended credit terms to their
customers. The Company continually monitors and manages the risks associated
with all these activities.
Depreciation is provided over the estimated useful lives of the assets
utilizing straight-line and declining balance methods. The methods for
financial statement and income tax purposes differ in some circumstances,
resulting in deferred income taxes.
The estimated useful lives of the various classes of assets are:
Range in Years
--------------
Land improvements.................... 10-15
Buildings and improvements........... 15-40
Machinery and equipment.............. 5-12
Furniture and fixtures............... 5-10
Transportation equipment............. 3-8
Intangible assets, primarily goodwill, result from the allocation of the
excess cost of acquisitions over the value of net tangible assets acquired.
Intangible assets are amortized using the straight-line method principally
over 20 to 40 years. In accordance with Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of", the Company periodically evaluates
-35-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
whether events or circumstances have occurred indicating that the net book
value of goodwill has been impaired. When factors indicate that goodwill
should be evaluated for possible impairment, the Company uses an estimate of
the acquired business' undiscounted future net cash flows compared to the
carrying value of goodwill to determine if a write-off is necessary.
Intangible assets were net of accumulated amortization of $25,997,000 and
$21,838,000 at December 31, 1995 and 1994, respectively. Business segment
amortization was as follows (in thousands):
1995 1994 1993
---- ---- ----
Giftware......................... $3,527 $2,108 $1,702
Direct Response.................. 666 666 574
Direct Selling................... 9 9 9
------ ------ ------
Total Consolidated............... $4,202 $2,783 $2,285
====== ====== ======
The Company accrues appropriate U.S. and foreign income taxes on earnings
of subsidiary companies which are intended to be remitted to the parent
company in the near future. The cumulative amount of unremitted earnings of
subsidiaries which has been, or is intended to be, permanently reinvested,
aggregated approximately $18,847,000 at December 31, 1995. Had such
reinvested unremitted earnings been distributed during 1995, applicable income
taxes would have amounted to approximately $4,233,000 representing primarily
taxes which would be withheld by foreign countries.
Primary earnings per common share are based on the average number of
common shares outstanding and common share equivalents during the year.
Common share equivalents represent dilutive stock options using the treasury
stock method. Fully diluted earnings per common share assumes, in addition to
the above, an additional dilutive effect of stock options.
The number of shares used in the earnings per common share computation
for 1995, 1994 and 1993 were as follows (in thousands):
1995 1994 1993
---- ---- ----
Primary
Average common shares outstanding.... 18,773 19,323 19,634
Stock options........................ 78 202 115
------ ------ ------
Average shares primary............... 18,851 19,525 19,749
Fully diluted
Additional dilutive effect of
stock options....................... 46 17 42
------ ------ ------
Average shares fully diluted......... 18,897 19,542 19,791
-36-
<PAGE>
2. NOTES AND LOANS PAYABLE:
-----------------------
Notes and loans payable and weighted average interest rates at December
31, 1995 and 1994 are as follows (in thousands):
1995 1994
---- ----
Interest Interest
Balance Rate Balance Rate
------- -------- ------- --------
Notes under uncommitted
bank lines............... $60,364 6.9% $39,023 6.5%
Notes under committed
bank lines............... 14,500 5.7% -
------- ---- ------- ----
Total................. $74,864 6.6% $39,023 6.5%
======= ==== ======= ====
Total interest paid was $7,339,000 in 1995, $1,860,000 in 1994 and
$2,015,000 in 1993.
In August 1995 the Company entered into a five year $200 million
multicurrency revolving credit agreement with various banks which can be used
for working capital, investing and financing activities. The agreement has an
annual facility and agency fee as well as a margin supplement for Eurocurrency
rate loans where more than one third of the commitment is utilized. The
agreement contains financial covenants that include requirements, as defined,
for minimum net worth, interest coverage and maximum borrowings. At December
31, 1995 the Company was in compliance with and there were no open borrowings
under the revolving credit agreement.
At December 31, 1995, the Company had formal and informal unused lines of
credit of approximately $300,000,000.
3. EMPLOYEE BENEFIT PLANS:
----------------------
The Company and some of its subsidiaries have several employee benefit
plans covering most of their full time U.S. employees. The benefits under
these plans are based primarily on years of service and compensation rates
near retirement. The plans are funded in conformity with Federal tax and
actuarial regulations. The figures for the domestic plans include
nonqualified supplemental plans.
-37-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
Pension expense for the domestic plans includes the following components
(in thousands):
1995 1994 1993
---- ---- ----
Service cost during the period........... $ 2,263 $ 2,151 $ 1,236
Interest cost on the projected
benefit obligation..................... 2,639 2,620 2,492
Actual return on plan assets............. ( 4,601) ( 48) ( 1,300)
Net amortization of prior service cost,
net transition liability and net loss.. 2,751 ( 1,675) 45
Special termination benefits enhancement. 888 - -
------- ------- -------
Pension expense.......................... $ 3,940 $ 3,048 $ 2,473
======= ======= =======
The following table sets forth the plans' funded status and amounts
recognized in the Company's balance sheet at December 31, 1995 and 1994 (in
thousands):
1995 1994
---- ----
Actuarial present value of benefit obligations:
Vested benefits................................... $31,962 $27,508
Nonvested benefits................................ 446 967
------- -------
Accumulated benefit obligation.................... 32,408 28,475
Additional obligation for future salary increases... 7,447 7,232
------- -------
Projected benefit obligation........................ 39,855 35,707
Fair value of plan assets, primarily
marketable securities............................. ( 25,244) ( 22,697)
------- -------
Unfunded excess of projected benefit obligation
over plan assets.................................. 14,611 13,010
Unrecognized net transition asset/(liability),
being recognized over 15 years.................... ( 123) ( 848)
Unrecognized prior service costs.................... 122 803
Unrecognized net gain/(loss)........................ ( 643) ( 2,939)
------- -------
Pension liability recognized in the balance sheet... $13,967 $10,026
======= =======
The weighted average discount rate used to measure the projected benefit
obligation and the rate of increase in future compensation levels both range
from 5% to 7% and the expected long-term rate of return on assets is 9%.
Certain foreign subsidiaries are required to pay a severance allowance to
eligible employees upon voluntary or involuntary separation. Provision is
made annually for all eligible employees. Generally, such payments are based
upon years of service and level of compensation.
-38-
<PAGE>
Severance expense for the combined foreign subsidiary severance allowance
programs includes the following components (in thousands):
1995 1994 1993
---- ---- ----
Service cost during the period......... $ 1,102 $ 1,213 $ 1,624
Interest cost on the projected benefit
obligation........................... 989 1,129 1,691
Actual return on plan assets........... ( 25) ( 44) ( 31)
Net amortization of prior service cost,
net transition liability and net loss ( 234) 344 262
------- ------- -------
Severance expense...................... $ 1,832 $ 2,642 $ 3,546
======= ======= =======
The following table sets forth the programs' funded status and amounts
recognized in the subsidiaries' balance sheets at December 31, 1995 and 1994
(in thousands):
1995 1994
---- ----
Actuarial present value of benefit obligations:
Vested benefits............................... $ 7,085 $ 8,681
Nonvested benefits............................ 1,085 1,055
------- -------
Accumulated benefit obligation................ 8,170 9,736
Additional obligation for future
salary increases.............................. 2,552 3,241
------- -------
Projected benefit obligation.................... 10,722 12,977
Fair value of plan assets....................... ( 224) ( 156)
------- -------
Unfunded excess of projected benefit obligation
over plan assets.............................. 10,498 12,821
Unrecognized net transition asset/(liability),
being recognized over 17 years................ ( 23) ( 746)
Unrecognized net gain/(loss).................... 1,450 1,132
------- -------
Severance liability recognized in the
balance sheet................................. $11,925 $13,207
======= =======
The discount rates used to measure the foreign projected benefit
obligation range from 5% to 15.5%, the rate of increase in future compensation
levels ranges from 1.2% to 12.5% and funding is not significant.
In addition to providing pension benefits, the Company and its
subsidiaries sponsor a single-employer defined benefit postretirement health
care and life insurance plan. Substantially all of the corporate employees
may become eligible for the benefits under this plan if they reach allowable
retirement age while working for the Company or its subsidiaries. Those
benefits are provided principally through insurance companies whose premiums
are based on the anticipated benefits to be paid. The total costs for such
retired employee benefits were principally accrued during their active
employment.
-39-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
Net periodic postretirement benefit expense includes the following
components (in thousands):
1995 1994 1993
---- ---- ----
Service cost.......................... $ 90 $ 280 $ 310
Interest cost on accumulated
postretirement benefit obligation... 60 170 180
------- ------- -------
Net periodic postretirement
benefit expense.................... $ 150 $ 450 $ 490
======= ======= =======
The following table sets forth the funded status of the plan reconciled
with the amount shown in the Company's balance sheet at December 31, 1995 and
1994 (in thousands):
1995 1994
---- ----
Accumulated postretirement benefit obligation:
Retirees....................................... $ 2,560 $ 2,652
Fully eligible active plan participants........ 103 459
Other active plan participants................. 837 2,085
------- -------
3,500 5,196
Plan assets at fair value........................ - -
------- -------
Accumulated postretirement benefit obligation
in excess of plan assets....................... 3,500 5,196
Unrecognized net loss, prior service cost
and net transition liability................... - -
------- -------
Accrued postretirement benefit liability
recognized in the balance sheet................ $ 3,500 $ 5,196
======= =======
A 25% annual rate of increase in the per capita cost of covered health
care benefits was assumed for 1996. The cost trend rate was assumed to
decrease gradually but still remain at double digit rates until 2020. After
2020, the rate was assumed to drop to and stabilize at 8%. Increasing the
assumed health care expense trend rates by one percentage point in each year
would increase the accumulated postretirement benefit obligation as of
December 31, 1995 by $170,000 and the aggregate of the service and interest
cost components of the net postretirement benefit expense for the year then
ended by $50,000.
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 6%.
In addition, provisions have been made for unfunded anticipated
retirement benefits for certain Officers. Also, certain subsidiaries have
established funded profit sharing and defined contribution retirement plans.
Total consolidated pension, severance allowance, profit sharing and retirement
plan expense amounted to $10,766,000 in 1995, $10,846,000 in 1994 and
$9,561,000 in 1993.
-40-
<PAGE>
In January 1995, the Company entered into an agreement with a third party
to license the domestic operations of its Direct Selling Group (See Note 10).
As a result, 336 participants of the qualified pension plan have either
retired or been terminated in 1995. The impact of the plan curtailment is an
approximate gain of $477,000 which was offset by certain enhanced retirement
benefits provided to affected participants amounting to approximately
$900,000.
4. SHAREHOLDERS' EQUITY:
--------------------
In 1988, the Company's Board of Directors adopted a Stockholder Rights
Plan in which common stock purchase rights were distributed to shareholders at
the rate of one right for each share of common stock creating common stock
together with the associated common stock purchase rights ("common stock").
The rights are exercisable at $85 per share and will expire on September 19,
1998.
In 1991, the shareholders approved a new Stock Option Plan previously
adopted by the Board of Directors which provides for both incentive and
nonqualified stock options. Options for up to 2,000,000 shares of common
stock may be granted under the 1991 Plan. The plan provides that nonqualified
options for 1,500 shares of common stock be granted annually from 1991 through
1995 to each non-employee Director then serving. The Company also has a 1984
Stock Option Plan, which provides for both incentive and nonqualified stock
options, under which options for up to 3,000,000 shares of common stock may be
granted. Both plans provide for the granting to selected key employees, and
non-employee Directors in the case of the 1991 Plan, of options to acquire
shares of such stock at a price not less than their fair market value at the
time of grant. Other option terms are determined at the time of grant, but
normally options are exercisable only after a one year waiting period in four
equal annual installments, and expire ten years from the date of grant.
In 1993, the Board of Directors approved a Special Interim Chief
Executive Officer Stock Option Plan which provided for a special one-time
grant of nonqualified stock options to the Company's Interim Chief Executive
Officer in lieu of cash compensation. These options vested fully in
increments of 10,000 during each month in which he served in that capacity,
are exercisable six months after the date of grant, and expire ten years from
the date of grant.
In October 1995, the Financial Accounting Standards Board adopted a new
standard on accounting for stock-based compensation. This new standard
establishes a fair value based method of accounting for all stock-based
compensation plans. The standard will become effective for the Company in
1996 and will apply to all stock based compensation, stock options in the case
of the Company, which were granted after December 15, 1994. The Company will
disclose the impact of adopting the new standard in the footnotes to the
financial statements and will continue to use APB Opinion No. 25 and related
interpretations to account for stock options that are reflected in the
financial statements.
-41-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
Stock option activity under all plans is summarized as follows (shares in
thousands):
Number
of Option
Shares Price
------ ------
Outstanding at December 31, 1992............ 1,399 $ 4.97-$41.12
Granted................................... 499 26.88- 33.25
Exercised................................. ( 50) 4.97- 27.13
Cancelled................................. ( 97) 26.88- 33.88
-----
Outstanding at December 31, 1993............ 1,751 8.94- 41.12
Granted................................... 744 31.88- 35.50
Exercised................................. ( 140) 8.94- 33.75
Cancelled................................. ( 52) 20.13- 41.12
-----
Outstanding at December 31, 1994............ 2,303 8.94- 41.12
Granted................................... 825 27.63- 31.38
Exercised................................. ( 230) 8.94- 29.63
Cancelled................................. ( 245) 27.00- 41.12
-----
Outstanding at December 31, 1995............ 2,653 $ 8.94-$35.50
=====
At December 31, 1995, there were 1,213,000 options vested and exercisable
and 131,000 shares available for future grants.
An analysis of treasury stock transactions for the years ended December
31, 1995, 1994 and 1993 is as follows (in thousands):
Common
------
Shares Cost
------ ----
Balance, December 31, 1992......................... 5,454 $ 82,143
Purchases.......................................... 436 11,984
Stock option exchanges............................. 7 248
Exercise of stock options.......................... ( 50) ( 187)
Issue of PAYSOP shares............................. ( 6) ( 21)
Investment Savings Plan - 401(k) issues............ ( 4) ( 16)
----- --------
Balance, December 31, 1993......................... 5,837 94,151
Purchases.......................................... 385 12,731
Stock option exchanges............................. 4 154
Exercise of stock options.......................... ( 140) ( 578)
Issue of PAYSOP shares............................. ( 6) ( 23)
Investment Savings Plan - 401(k) issues............ ( 3) ( 14)
----- --------
Balance, December 31, 1994......................... 6,077 106,421
Purchases.......................................... 1,061 31,544
Stock option exchanges............................. 4 105
Exercise of stock options.......................... ( 230) ( 949)
Issue of PAYSOP shares............................. ( 6) ( 27)
Investment Savings Plan - 401(k) issues............ ( 6) ( 26)
Non-employee Director Stock Plan issues............ ( 2) ( 7)
----- --------
Balance, December 31, 1995......................... 6,898 $137,061
===== ========
-42-
<PAGE>
In 1985, the Company approved a Payroll-Based Stock Ownership Plan
("PAYSOP") which provides common stock to eligible employees and allows the
Company a Federal income tax deduction equal to the market value of the issued
stock. In 1987, the Company introduced an Investment Savings Plan in
accordance with Section 401(k) of the Internal Revenue Code. One of the
features of this retirement savings plan provides common stock to eligible
employees and allows the Company a Federal income tax deduction equal to the
market value of the issued stock. In 1995, the shareholders approved a Non-
Employee Director Stock Plan previously recommended by the Board of Directors
which provides an annual grant of 200 shares of common stock to each then
serving non-employee Director over a five year period ending December 31,
1999. The maximum number of shares reserved for this plan is 15,000.
The change in capital in excess of par value resulted from the exercise
of stock options, including the related income tax benefit ($5,366,000,
$3,090,000 and $684,000 in 1995, 1994 and 1993, respectively), issuance of
PAYSOP shares ($154,000 in 1995 and $173,000 each in 1994 and 1993), issuance
of 401(k) Plan shares ($163,000, $99,000 and $117,000 in 1995, 1994 and 1993,
respectively) and issuance of Non-Employee Director Stock Plan shares ($39,000
in 1995) noted above.
An analysis of the change in shareholders' equity from the cumulative
translation adjustment component for the years ended December 31, 1995, 1994
and 1993 is as follows (in thousands):
Cumulative Translation Adjustments
----------------------------------
Balance, December 31, 1992......................... $22,337
Adjustment for 1993................................ 5,068
-------
Balance, December 31, 1993......................... 27,405
Adjustment for 1994................................ 256
-------
Balance, December 31, 1994......................... 27,661
Adjustment for 1995................................ ( 252)
-------
Balance, December 31, 1995......................... $27,409
=======
5. OTHER INCOME (EXPENSE), NET:
---------------------------
Other income (expense), net consists of the following (in thousands):
1995 1994 1993
---- ---- ----
Investment income................. $ 2,836 $ 3,738 $ 4,207
Other assets amortization......... ( 4,202) ( 2,783) ( 2,285)
Other items, net.................. ( 1,040) 1,251 677
------- ------- -------
($ 2,406) $ 2,206 $ 2,599
======= ======= =======
-43-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
6. GEOGRAPHIC INFORMATION AND BUSINESS SEGMENTS:
--------------------------------------------
The Company operates predominately in two major geographic areas and
three business segments. The major segment is giftware which imports and
distributes creatively designed giftware and collectibles to a diverse group
of retailers throughout the world. The next largest segment, based on sales,
is direct selling which is engaged in the manufacture, sale and distribution
of household cleaning, personal grooming and related products in international
markets. The smallest segment, based on sales, is direct response which
markets collectibles and giftware to consumers and retailers in domestic and
international markets.
Transfers between geographic areas and segments are made at the market
value of the merchandise transferred. The eliminations in the identifiable
assets are for intercompany receivables and profit in inventory. Unallocated
assets have consisted principally of certificates of deposit, time deposits,
marketable securities and unallocated receivables.
The following tables summarize the Company's operations by geographic
area and business segment for 1995, 1994 and 1993 (in thousands):
GEOGRAPHIC AREAS
---------------- 1995 1994 1993
---- ---- ----
Net sales
United States................ $538,502 $519,997 $480,258
Europe....................... 233,605 204,418 205,326
Other International and
Eliminations............... 58,082 65,761 65,079
-------- -------- --------
Total consolidated....... $830,189 $790,176 $750,663
======== ======== ========
Operating profit*
United States................ $ 65,645 $ 62,377 $ 50,852
Europe....................... 24,245 22,711 17,840
Other International and
Eliminations............... 6,718 8,246 4,455
-------- -------- --------
Operating profit before
unallocated expense...... 96,608 93,334 73,147
Unallocated expense....... ( 10,112) ( 12,782) ( 7,595)
-------- -------- --------
Total consolidated....... $ 86,496 $ 80,552 $ 65,552
======== ======== ========
Identifiable assets
United States................ $333,505 $324,802 $298,014
Europe....................... 175,806 173,460 81,646
Other International and
Eliminations............... 16,165 6,084 18,759
-------- -------- --------
Identifiable assets....... 525,476 504,346 398,419
Corporate assets.......... 8,990 7,777 31,312
-------- -------- --------
Total consolidated....... $534,466 $512,123 $429,731
======== ======== ========
*Operating profit for 1993 includes restructuring charges of $10,110 for the
United States, $5,140 for Europe and $1,750 for other international
locations.
-44-
<PAGE>
BUSINESS SEGMENTS
- -----------------
1995 1994 1993
---- ---- ----
Net sales
Giftware.......................... $491,196 $417,685 $367,531
Direct Response................... 149,597 134,389 129,366
Direct Selling.................... 192,429 240,996 255,120
Eliminations...................... ( 3,033) ( 2,894) ( 1,354)
-------- -------- --------
Total consolidated................ $830,189 $790,176 $750,663
======== ======== ========
Operating profit*
Giftware.......................... $ 77,705 $ 64,800 $ 52,593
Direct Response................... ( 2,103) 7,996 10,391
Direct Selling.................... 21,006 20,538 10,163
-------- -------- --------
Operating profit before
unallocated expense.............. 96,608 93,334 73,147
Unallocated expense............... ( 10,112) ( 12,782) ( 7,595)
-------- -------- --------
Total consolidated................ $ 86,496 $ 80,552 $ 65,552
======== ======== ========
Depreciation and amortization
Giftware.......................... $ 8,627 $ 5,330 $ 5,261
Direct Response................... 1,795 1,605 1,354
Direct Selling.................... 2,529 3,248 3,761
-------- -------- --------
Depreciation and amortization..... 12,951 10,183 10,376
Corporate depreciation and
amortization..................... 188 257 263
-------- -------- --------
Total consolidated................ $ 13,139 $ 10,440 $ 10,639
======== ======== ========
Capital expenditures
Giftware.......................... $ 9,738 $ 12,032 $ 2,299
Direct Response................... 1,275 1,192 1,105
Direct Selling.................... 2,360 3,326 2,787
-------- -------- --------
Capital expenditures.............. 13,373 16,550 6,191
Corporate capital expenditures.... 91 206 320
-------- -------- --------
Total consolidated................ $ 13,464 $ 16,756 $ 6,511
======== ======== ========
Identifiable assets
Giftware.......................... $535,138 $474,174 $346,309
Direct Response................... 113,926 108,688 90,890
Direct Selling.................... 90,605 92,719 91,210
Eliminations...................... ( 214,193) ( 171,235) ( 129,990)
-------- -------- --------
Identifiable assets............... 525,476 504,346 398,419
Corporate assets.................. 8,990 7,777 31,312
-------- -------- --------
Total consolidated................ $534,466 $512,123 $429,731
======== ======== ========
*Operating profit for 1993 includes restructuring charges of $4,000 for
Giftware and $13,000 for Direct Selling.
-45-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
7. INCOME TAXES (in thousands):
------------
The domestic and foreign components of the net deferred tax
benefit/(liability) on income consist of the following:
Deferred Tax Benefit(Liability)
------------------------------
1995 1994
---- ----
United States
Federal--
Prepaid advertising.......................... ($12,066) ($12,437)
Acquisition step-up amortization adjustment.. ( 4,165) ( 4,195)
Accelerated depreciation..................... ( 1,441) ( 1,453)
Inventory reserve............................ 5,622 5,328
Deferred compensation........................ 5,062 4,333
Bad debt reserve............................. 3,772 2,581
Postretirement benefits...................... 1,204 1,756
Returns and allowances reserve............... 1,174 1,183
Other items, net............................. 2,145 2,236
------- -------
1,307 ( 668)
------- -------
State--
Prepaid advertising.......................... ( 2,200) ( 2,236)
Acquisition step-up amortization adjustment.. ( 896) ( 902)
Accelerated depreciation..................... ( 307) ( 307)
Inventory reserve............................ 1,155 1,113
Deferred compensation........................ 1,082 924
Bad debt reserve............................. 717 493
Postretirement benefits...................... 259 378
Returns and allowances reserve............... 252 254
Other items, net............................. 470 508
------- -------
532 225
------- -------
Foreign
Accelerated depreciation..................... ( 3,145) ( 2,374)
Other items, net............................. 1,387 1,583
------- -------
( 1,758) ( 791)
------- -------
Total $ 81 ($ 1,234)
======= =======
The domestic and foreign components of income before income taxes are as
follows:
1995 1994 1993
---- ---- ----
Domestic.......................... $48,201 $50,039 $46,198
Foreign........................... 28,138 30,700 19,942
------- ------- -------
$76,339 $80,739 $66,140
======= ======= =======
-46-
<PAGE>
The provision for income taxes consists of the following:
1995 1994 1993
---- ---- ----
Currently payable:
United States Federal................. $19,740 $18,733 $15,658
United States State................... 4,306 4,963 4,585
Foreign............................... 11,708 15,259 13,459
------- ------- -------
35,754 38,955 33,702
------- ------- -------
Deferred:
United States Federal................. ( 1,975) ( 1,082) 345
United States State................... ( 307) ( 320) ( 9)
Foreign............................... 967 ( 870) ( 1,031)
------- ------- -------
( 1,315) ( 2,272) ( 695)
------- ------- -------
$34,439 $36,683 $33,007
======= ======= =======
A reconciliation of the total effective tax rate to the statutory Federal
income tax rate is as follows:
1995 1994 1993
---- ---- ----
Statutory income tax rate...................... 35.0% 35.0% 35.0%
State taxes, net of Federal income tax effect.. 3.4 3.7 5.0
Impact of foreign tax rates and credits........ 4.0 4.2 4.4
Restructuring impact........................... - - 3.6
Foreign subsidiaries in loss position receiving
little or no tax benefit..................... .6 .5 1.1
Impact of nondeductible expenses............... 2.3 2.3 1.0
Other items, net............................... ( .2) ( .3) ( .2)
---- ---- ----
Total effective income tax rate................ 45.1% 45.4% 49.9%
==== ==== ====
The Company made income tax payments of $42,708,000 in 1995, $21,909,000
in 1994 and $33,442,000 in 1993.
8. FINANCIAL INSTRUMENTS:
---------------------
The Company enters into various short-term foreign exchange agreements
during the year, all of which are held for purposes other than trading. The
purpose of the Company's foreign currency hedging activities is to protect the
Company from risk that the eventual settlement of foreign currency
transactions will be adversely affected by changes in exchange rates. The
Company's various subsidiaries import products in foreign currencies and from
time to time will enter into agreements or build foreign currency deposits as
a partial hedge against currency fluctuations on inventory purchases. Gains
and losses on these agreements are deferred and recorded as a component of
cost of sales when the related inventory is sold. At December 31, 1995, there
were no open inventory purchase agreements and deferred amounts were not
material. The Company makes short-term foreign currency intercompany loans to
various international subsidiaries and utilizes agreements to fully hedge
-47-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
these transactions against currency fluctuations. The cost of these
agreements is included in the interest charged to the subsidiaries and
expensed monthly as the interest is accrued. The intercompany interest
eliminates upon consolidation and any gains and losses on the agreements are
recorded as a component of other income. All of the outstanding agreements as
of December 31, 1995 are to hedge intercompany loans. The Company receives
dividends, technical service fees, royalties and other payments from its
subsidiaries and licensees. From time to time, the Company will enter into
foreign currency forward agreements as a partial hedge against currency
fluctuations on these current receivables. Gains and losses are recognized or
the credit or debit offsets the foreign currency payables. As of December 31,
1995, net deferred amounts on outstanding agreements were not material. The
outstanding agreement amounts (notional value) at December 31, 1995, are as
follows (in thousands):
Canada $ 6,596
Germany 4,455
France 2,651
Spain 2,463
U.S. 500
-------
Total $16,665
=======
9. ACQUISITION:
-----------
In September 1994, the Company announced an all cash tender offer to
acquire 100% of the shares of Lilliput Group plc ("Lilliput"), a U.K.-based
manufacturer and distributor of family giftware. Lilliput's products are sold
to a diverse group of retailers in the U.K. and United States, and through
export to 48 countries. Its primary product line is hand-painted miniature
cottages sold under the "Lilliput Lane" brand name.
By December 31, 1994, the Company acquired all of the outstanding shares
of Lilliput. The acquisition was accounted for as a purchase, with the
purchase price amounting to $62.5 million including broker and related
acquisition costs. Funds used for the purchase were provided from the
liquidation of the Company's short-term investments and incurrence of short-
term bank loans.
The purchase price was allocated to net assets acquired based upon their
fair values. The excess of the aggregate purchase price over the fair value
of net assets acquired of $54.8 million has been assigned to goodwill and is
being amortized on a straight-line basis over 40 years.
The Company's consolidated financial statements for 1994 reflected the
acquisition and the operating results of Lilliput starting with October.
-48-
<PAGE>
10. LICENSE AGREEMENT:
-----------------
In January 1995, the Company entered into an agreement with a third
party to license the domestic operations of its Direct Selling Group. The
business that was licensed, known as Stanley Home Products ("SHP"), marketed
home care, personal care and cosmetic items to consumers through direct
selling programs. The agreement called for the third party to license the
trademarks and formulas of SHP for use in the U.S., Puerto Rico and Canada,
and remit to the Company royalties based on sales of the related products.
The licensed areas in 1994 recorded net sales of approximately $36 million and
operating losses of approximately $3.5 million. These 1994 sales represented
approximately 14% of the Direct Selling Group's net sales and less than 5% of
the Company's consolidated net sales.
The transfer of the businesses was completed in the second quarter of
1995. In connection with this agreement, the Company closed administrative
and distribution facilities in the U.S. and Puerto Rico during the first
quarter of 1995. The total costs to exit the SHP operations, including
employee severance benefits, will be offset by a comparable amount of gains,
approximately $6 million, net, primarily from the sale of SHP's distribution
facilities. The costs to exit the SHP operations have not had and are not
expected to have a material adverse impact on the Company's future operating
results or financial condition. There was no material impact in 1995.
11. RESTRUCTURING PROGRAM:
---------------------
In the second quarter of 1993, the Company incurred a restructuring
charge of $17 million pre-tax, $11.5 million after tax, or $.58 per share.
The restructuring charge did not include any future operating expenses or
future systems enhancements. The tax benefit of $5.5 million, or 32%, was
limited by the inability to fully receive tax benefits for all of the charges
in certain international locations. The charge included $9.7 million for
severance pay related expenses, $4.8 million for facilities closing and
moving, $1.7 million write down of current assets, and $.8 million write down
of net fixed assets. There has not been any material change in the major
components of the charges. The restructuring charge was $13 million for the
Direct Selling Group and $4 million for the Giftware Group. The restructuring
program was completed in 1995 and no additional charges were incurred. The
restructuring included the closing of the Gift Gallery and Industrial
Divisions in the United States and the closing of subsidiary operations in
Australia, Germany and Portugal.
As of December 31, 1995, the restructuring accrual was not material and
as of December 31, 1994, it was $4.9 million, principally consisting of
severance payments.
-49-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
12. COMMITMENTS AND CONTINGENCIES:
-----------------------------
The Company and its subsidiaries incurred rental expense under operating
leases of $9,081,000 in 1995, $8,010,000 in 1994 and $6,019,000 in 1993.
The minimum rental commitments under noncancelable operating leases as of
December 31, 1995 are as follows (in thousands):
Period Aggregate Amount
------ ----------------
1996.............................. $ 7,288
1997.............................. 5,217
1998.............................. 4,226
1999.............................. 3,008
2000.............................. 676
Later years.......................... 2,327
-------
Total minimum future rentals................. $22,742
=======
The Company and its subsidiaries have entered into various licensing
agreements requiring royalty payments ranging from .3% to 15.5% of specified
product sales. Royalty expense under these licensing agreements totaled
$36,400,000 in 1995, $31,100,000 in 1994 and $28,100,000 in 1993. Pursuant to
the various licensing agreements, the future minimum guaranteed royalty
payments are $14,100,000 in 1996, $13,700,000 in 1997 and $12,900,000 in 1998.
There are various legal proceedings pending against the Company and its
subsidiaries which have arisen during the normal course of business.
Management does not believe that the ultimate outcome of those legal
proceedings will have a material adverse impact upon the consolidated
financial condition of the Company.
-50-
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Shareholders and Board of Directors of Stanhome Inc.:
We have audited the accompanying consolidated balance sheet of Stanhome
Inc. (a Massachusetts corporation) and subsidiaries as of December 31, 1995
and 1994, and the related consolidated statements of income, retained earnings
and cash flows for each of the three years in the period ended December 31,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Stanhome Inc. and
subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1995 in conformity with generally accepted accounting
principles.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Hartford, Connecticut
February 22, 1996
-51-
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS LAST TEN YEARS
(In thousands, except per share amounts)
STANHOME INC.
1995 1994 1993a.
<S> <C> <C> <C>
Net sales...................................... $830,189 $790,176 $750,663
Cost of sales.................................. 353,884 324,988 304,660
-------- -------- --------
Gross profit................................... 476,305 465,188 446,003
Selling, general and administrative expense.... 389,809 384,636 380,451
-------- -------- --------
Operating profit............................... 86,496 80,552 65,552
Interest expense............................... ( 7,751) ( 2,019) ( 2,011)
Other income (expense), net.................... ( 2,406) 2,206 2,599
-------- -------- --------
Income before income taxes..................... 76,339 80,739 66,140
Income taxes................................... 34,439 36,683 33,007
-------- -------- --------
Net income..................................... $ 41,900 $ 44,056 $ 33,133
======== ======== ========
Earnings per common share fully diluted:
Net income.................................... $ 2.22 $ 2.25 $ 1.67
======== ======== ========
Average shares of common stock fully diluted... 18,897 19,542 19,791
Shares of common stock outstanding at year end. 18,330 19,151 19,392
Market value per common share at year end...... $ 29.13 $ 31.63 $ 33.88
Cash dividends paid or provided for............ $ 19,838 $ 19,863 $ 19,620
Dividends per common share..................... $ 1.06 $ 1.03 $ 1.00
Capital expenditures........................... $ 13,464 $ 16,756 $ 6,511
Depreciation................................... $ 8,938 $ 7,657 $ 8,354
Working capital................................ $ 99,927 $102,460 $159,299
Total assets................................... $534,466 $512,123 $429,731
Total long-term liabilities.................... $ 25,231 $ 22,509 $ 20,312
Shareholders' equity........................... $266,790 $269,396 $254,366
Book value per common share.................... $ 14.55 $ 14.07 $ 13.12
Return on average shareholders' equity......... 16% 17% 13%
</TABLE>
Note:
a. Includes a restructuring operating charge of $17 million pre-tax, $11.5
million after tax or $.58 per share.
The financial data set forth above should be read in connection with the
financial statements, accompanying notes and Management's Discussion on the
preceding pages.
-52-
<PAGE>
<TABLE>
<CAPTION>
1992 1991 1990 1989 1988 1987 1986
<C> <C> <C> <C> <C> <C> <C>
$744,072 $710,208 $675,665 $571,380 $480,374 $433,154 $380,501
295,118 281,668 264,609 222,612 187,095 165,645 148,029
-------- -------- -------- -------- -------- -------- --------
448,954 428,540 411,056 348,768 293,279 267,509 232,472
365,521 349,404 323,547 268,478 219,094 202,774 180,133
-------- -------- -------- -------- -------- -------- --------
83,433 79,136 87,509 80,290 74,185 64,735 52,339
( 3,351) ( 5,016) ( 5,394) ( 5,945) ( 8,142) ( 6,146) ( 3,378)
6,910 7,019 8,143 5,305 5,756 3,847 1,587
-------- -------- -------- -------- -------- -------- --------
86,992 81,139 90,258 79,650 71,799 62,436 50,548
40,276 36,086 39,191 35,026 31,159 29,725 24,900
-------- -------- -------- -------- -------- -------- --------
$ 46,716 $ 45,053 $ 51,067 $ 44,624 $ 40,640 $ 32,711 $ 25,648
======== ======== ======== ======== ======== ======== ========
$ 2.32 $ 2.21 $ 2.54 $ 2.23 $ 1.96 $ 1.58 $ 1.17
======== ======== ======== ======== ======== ======== ========
20,160 20,355 20,112 20,037 20,710 20,677 21,841
19,774 19,791 19,550 19,365 19,953 19,585 18,975
$ 34.75 $ 37.00 $ 33.75 $ 25.88 $ 18.38 $ 15.00 $ 11.38
$ 18,950 $ 18,134 $ 16,172 $ 13,727 $ 11,994 $ 9,106 $ 8,367
$ .96 $ .92 $ .83 $ .71 $ .605 $ .47 $ .40
$ 6,873 $ 7,821 $ 10,925 $ 5,067 $ 5,137 $ 6,741 $ 11,051
$ 8,396 $ 7,940 $ 7,649 $ 6,725 $ 6,660 $ 5,771 $ 5,521
$160,977 $138,913 $112,716 $ 71,508 $ 76,290 $ 46,993 $ 17,990
$415,618 $419,319 $391,822 $335,154 $275,525 $244,267 $202,200
$ 21,393 $ 23,506 $ 21,691 $ 17,682 $ 11,319 $ 11,743 $ 9,163
$256,956 $241,074 $211,457 $170,399 $158,169 $130,755 $100,768
$ 12.99 $ 12.18 $ 10.82 $ 8.80 $ 7.93 $ 6.68 $ 5.31
19% 20% 27% 29% 29% 28% 23%
</TABLE>
-53-
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF STANHOME INC.
<TABLE>
<CAPTION>
Other Names
Jurisdiction Under Which
Name of Organization Business is Conducted
<S> <C> <C>
Collector Appreciation, Inc. Delaware
Consumer Products Group, Inc. Florida
Cosmhogar, S.A. Spain
Enesco Corporation Ohio The Back Door Store
Via Vermont
Enesco European Giftware Group
Limited England
Enesco Import GmbH Germany
Enesco International Ltd. Delaware
Enesco International (H.K.)
Limited Hong Kong
Enesco Worldwide Holdings, Inc. Delaware
Hamilton Collection (Deutschland)
GmbH Germany
Hamilton Worldwide Holdings, Inc. Delaware
Heinz Deichert GmbH Germany
Julie Paradis S.A.R.L. France
N.C. Cameron & Sons Limited Ontario, Canada
Nuova Lunaria S.r.L. Italy
Permis de Construire S.A. France
Sports Impressions, Inc. Delaware
Stanesco Holding S.A. France
Stanhome Capital, Inc. Delaware
Stanhome de Colombia Ltda. Colombia
Stanhome de Mexico, S.A. de C.V. Mexico
Stanhome European Development
Center, S.A. Spain
Stanhome Financial ATC Limited Ireland
Stanhome Panamericana, C.A. Venezuela
Stanhome plc England
<PAGE>
Stanhome S.A. France
Stanhome, S.A. Spain
Stanhome S.p.A. Italy
Stanhome Trading Company d.o.o. Slovenia
Stanhome West Germany Limited Delaware
Stanhome Worldwide Direct
Selling Group, Inc. Delaware
Stanley Home Produtos de
Limpeza Ltda. Brazil
The Hamilton Collection, Inc. Florida The Hamilton Group
Trans Europ Diffusion S.A. France
Via Vermont, S.A. de C.V. Mexico
</TABLE>
All of the above-listed subsidiaries are included in the Company's
consolidated financial statements for all of both 1994 and 1995, except for
Collector Appreciation, Inc., which began operations in February, 1994;
Enesco European Giftware Group Limited (previously Lilliput Group plc),
which was acquired in October, 1994; Hamilton Collection (Deutschland)
GmbH, which was organized in March, 1996; Hamilton Worldwide Holdings,
Inc., which was incorporated in November, 1995; Julie Paradis S.A.R.L.,
which was acquired in March, 1996; Nuova Lunaria S.r.L., which was
incorporated in May, 1995; Permis de Construire S.A., which was acquired in
March, 1996; Stanesco Holding S.A., which was incorporated in February,
1996; Stanhome de Colombia Ltda., which was incorporated in October, 1995;
Stanhome Financial ATC Limited, which was incorporated in October, 1994;
Stanhome plc, which was incorporated in June, 1994; Stanhome Worldwide
Direct Selling Group, Inc., which began operations in March, 1995; and
Trans Europ Diffusion S.A., which was acquired in March, 1996.
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
------------------------------------------
As independent public accountants, we hereby consent to the incorporation
of our reports included in this Form 10-K, into the Company's previously
filed Registration Statements File No. 2-97934, No. 33-11415, No. 33-42974
and No. 33-50723 and No. 33-58633.
/s/ Arthur Andersen LLP
Hartford, Connecticut
March 27, 1996
<PAGE> EXHIBIT 24
POWER OF ATTORNEY
Each of the undersigned Directors of Stanhome Inc. whose signature
appears below constitutes and appoints G. William Seawright and Bruce H.
Wyatt, and each of them, his or her true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him or her
and in his or her name, place and stead, in any and all capacities, to sign
an annual report on Form 10-K for the fiscal year ended December 31, 1995
with the Securities and Exchange Commission under the Securities Exchange
Act of 1934, as amended, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full
power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or
their substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
March 6, 1996 By: /s/H.L. Tower
H.L. Tower
Director, Chairman of the Board
March 6, 1996 By: /s/Homer G. Perkins
Homer G. Perkins
Director
March 26, 1996 By: /s/Allan Keirstead
Allan G. Keirstead
Director, Executive Vice President and
Chief Administrative & Financial Officer
March 6, 1996 By: /s/John F. Cauley, Jr.
John F. Cauley, Jr.
Director
March 26, 1996 By: /s/G. William Seawright
G. William Seawright
Director, President and Chief Executive
Officer
March 6, 1996 By: /s/Thomas R. Horton
Thomas R. Horton
Director
March 6, 1996 By: /s/Anne-Lee Verville
Anne-Lee Verville
Director
March 6, 1996 By: /s/Judith R. Haberkorn
Judith R. Haberkorn
Director
March 6, 1996 By: /s/Janet M. Clarke
Janet M. Clarke
Director
March 6, 1996 By: /s/Charles W. Elliott
Charles W. Elliott
Director
[ARTICLE] 5 EXHIBIT 27
<TABLE>
<S> <C> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-END] DEC-31-1995
[CASH] 23,053,926
[SECURITIES] 0
[RECEIVABLES] 179,313,556
[ALLOWANCES] 20,740,597
[INVENTORY] 114,294,928
[CURRENT-ASSETS] 342,371,584
[PP&E] 131,795,141
[DEPRECIATION] 70,947,871
[TOTAL-ASSETS] 534,466,223
[CURRENT-LIABILITIES] 242,444,641
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 3,153,530
[OTHER-SE] 263,636,697
[TOTAL-LIABILITY-AND-EQUITY] 534,466,223
[SALES] 830,189,446
[TOTAL-REVENUES] 830,189,446
[CGS] 353,884,092
[TOTAL-COSTS] 353,884,092
[OTHER-EXPENSES] 389,809,785
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 7,751,347
[INCOME-PRETAX] 76,338,515
[INCOME-TAX] 34,438,941
[INCOME-CONTINUING] 41,899,574
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 41,899,574
[EPS-PRIMARY] 2.22
[EPS-DILUTED] 2.22
</TABLE>
