-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RUbKjzMfKlmQXinR8jlzrhoG/zwzYx5n17zPrl99I/STG6EF/VyBhn83qhasgOip soBF7tBmwC55PfD78G5ecQ== 0000093542-96-000002.txt : 19960328 0000093542-96-000002.hdr.sgml : 19960328 ACCESSION NUMBER: 0000093542-96-000002 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960327 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: STANHOME INC CENTRAL INDEX KEY: 0000093542 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-MISCELLANEOUS NONDURABLE GOODS [5190] IRS NUMBER: 041864170 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-09267 FILM NUMBER: 96539065 BUSINESS ADDRESS: STREET 1: 333 WESTERN AVE CITY: WESTFIELD STATE: MA ZIP: 01085 BUSINESS PHONE: 4135623631 FORMER COMPANY: FORMER CONFORMED NAME: STANLEY HOME PRODUCTS INC DATE OF NAME CHANGE: 19820513 10-K405 1 FORM 10-K 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. -1- 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 -2- 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 -3- 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 -4- 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 -5- 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 -6- 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 -7- 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.
EXECUTIVE OFFICERS OF THE REGISTRANT Date First Name Age Positions Elected 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 -8- 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. -9- 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.
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- 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- 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- 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- 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:
Schedule Number Description II Valuation and Qualifying Accounts and Reserves For the Three Years Ended December 31, 1995
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- 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- SCHEDULE II STANHOME INC. ------------- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES ---------------------------------------------- FOR THE THREE YEARS ENDED DECEMBER 31, 1995 --------------------------------------------
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 ----------- ---------- ---------- ---------- ---------- ---------- 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 =========== ===========
Note: (a) Represents recorded reserves at dates of acquisitions. (b) Revised to include returns and allowances. -16-
EXHIBIT INDEX Reg. S-K Item 601 EXHIBIT 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- 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
-18- EX-1 2 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- % 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- 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- EX-2 3 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. EX-3 4 EXHIBIT 13
STANHOME INC. Percentage Increase FINANCIAL HIGHLIGHTS 1994 1995 (Decrease) (In millions, except per share amounts) 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%)
SALES In Million Dollars (Graphic Material Omitted) Year 1991 710 1992 744 1993 751 1994 790 1995 830
OPERATING PROFIT In Million Dollars (Graphic Material Omitted) Year 1991 79 1992 83 1993 66 1994 81 1995 86
EARNINGS PER SHARE FULLY DILUTED NET INCOME In Dollars (Graphic Material Omitted) Year 1991 2.21 1992 2.32 1993 1.67 1994 2.25 1995 2.22
RETURN ON EQUITY Percent (Graphic Material Omitted) Year 1991 20% 1992 19% 1993 13% 1994 17% 1995 16%
Stock Market, Dividend and Shareholder Information 1994 Market Price ------------ Quarter Dividend High Low - ------------------------------------------- First $.25 $37.00 $31.75 Second .25 35.88 32.38 Third .265 35.88 31.88 Fourth .265 34.63 28.75
1995 Market Price ------------ Quarter Dividend High Low - ------------------------------------------- First $.265 $31.50 $26.88 Second .265 33.00 27.13 Third .265 33.38 30.38 Fourth .265 32.38 28.50
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- 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- 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- 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- 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- 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- 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- 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- 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- 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- CONSOLIDATED BALANCE SHEET December 31, 1995 and 1994 STANHOME INC.
ASSETS 1995 1994 ---- ---- 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 ============ ============
The accompanying notes are an integral part of these financial statements. -30-
LIABILITIES AND SHAREHOLDERS' EQUITY 1995 1994 ---- ---- 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 ============ ============
-31- CONSOLIDATED STATEMENT OF INCOME For the Years Ended December 31, 1995, 1994 and 1993 STANHOME INC.
1995 1994 1993 ---- ---- ---- 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
CONSOLIDATED STATEMENT OF RETAINED EARNINGS For the Years Ended December 31, 1995, 1994 and 1993
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 ============ ============ ============
The accompanying notes are an integral part of these financial statements. -32- CONSOLIDATED STATEMENT OF CASH FLOWS For the Years Ended December 31, 1995, 1994 and 1993 STANHOME INC.
1995 1994 1993 ---- ---- ---- 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 =========== =========== ===========
The accompanying notes are an integral part of these financial statements. -33- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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- 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-
FINANCIAL HIGHLIGHTS LAST TEN YEARS (In thousands, except per share amounts) STANHOME INC. 1995 1994 1993a. 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%
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-
1992 1991 1990 1989 1988 1987 1986 $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%
-53- EX-4 5 EXHIBIT 21 SUBSIDIARIES OF STANHOME INC.
Other Names Jurisdiction Under Which Name of Organization Business is Conducted 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 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
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. EX-5 6 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 EX-6 7 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 EX-7 8 [ARTICLE] 5 EXHIBIT 27 [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
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