SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
ANNUAL REPORT
PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2000
Commission File Number 0-05531
GERALD STEVENS, INC. 401(k) PLAN
Gerald Stevens, Inc.
1800 Eller Drive
Suite 300
Ft. Lauderdale, Florida 33316
GERALD STEVENS, INC. 401(k) PLAN
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TABLE OF CONTENTS
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Page No.
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Report of Independent Certified Public Accountants 3
Statement of Net Assets Available for Benefits 4
As of December 31, 2000 and 1999
Statement of Changes in Net Assets Available for Benefits 5
For the Year ended December 31, 2000
Notes to Financial Statements 6
Supplemental Schedule
Schedule H, Part IV, Line 4I - Schedule of Assets Held
for Investment Purposes
As of December 31, 2000 11
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
To the Plan Administrator
of the Gerald Stevens, Inc.
401(k) Plan:
We have audited the accompanying statement of net assets available for benefits
of the Gerald Stevens, Inc. 401(k) Plan (the "Plan") as of December 31, 2000 and
the related statement of changes in net assets available for benefits for the
year ended December 31, 2000. These financial statements and the schedule
referred to below are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audit.
The statement of net assets available for benefits of the Plan as of December
31, 1999 was not audited by us and, accordingly, we do not express an opinion on
it.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. 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 audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 2000 and the changes in its net assets available for benefits for
the year ended December 31, 2000, in conformity with accounting principles
generally accepted in the United States.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplemental schedule of assets held for
investment purposes is presented for purposes of additional analysis and is not
a required part of the basic financial statements but is supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. The supplemental schedule has been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in our opinion, is
fairly stated in all material respects in relation to the basic financial
statements taken as a whole.
As discussed in Note 10 to the accompanying financial statements, management of
Gerald Stevens, Inc., the Plan sponsor, has filed for protection under Chapter
11 of the United States Bankruptcy Code. The accompanying financial statements
have been prepared assuming that the Plan will continue as a going concern.
However, because of the Plan sponsor's financial difficulties, there is
substantial doubt about whether the Plan will continue as a going concern. The
accompanying financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Miami, FL,
June 29, 2001.
3
GERALD STEVENS, INC. 401(k) PLAN
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STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
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AS OF DECEMBER 31, 2000 AND 1999
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2000 1999
---- ----
(Unaudited)
ASSETS:
Investments at fair market value $3,935,662 $2,468,319
Receivables:
Employer contributions 300,744 241,361
Participant contributions 16,109 21,425
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Total receivables 316,853 262,786
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Total assets 4,252,515 2,731,105
LIABILITIES:
Due to participants 196,815 --
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Net assets available for benefits $4,055,700 $2,731,105
========== ==========
The accompanying notes to financial statements are an integral part of these
statements.
4
GERALD STEVENS, INC. 401(k) PLAN
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STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
---------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 2000
------------------------------------
ADDITIONS TO NET ASSETS ATTRIBUTED TO:
Investment income (loss):
Net depreciation in fair value of investments $ (685,431)
Interest income 2,234
Dividends 211,483
----------
Total Investment loss (471,714)
----------
Contributions:
Participant contributions 1,769,958
Participant rollovers 201,165
Employer contributions 302,629
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Total Contributions 2,273,752
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Total additions 1,802,038
DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO:
Benefits paid to participants 247,057
Corrective distributions 230,386
----------
Total deductions 477,443
----------
Net increase 1,324,595
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year (unaudited) 2,731,105
----------
End of year $4,055,700
==========
The accompanying notes to financial statements are an integral part of these
statements.
5
GERALD STEVENS, INC. 401(k) PLAN
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NOTES TO FINANCIAL STATEMENTS
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1. DESCRIPTION OF PLAN
- ------------------------
General
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The following description of the Gerald Stevens, Inc. 401(k) Plan (the "Plan")
is provided for general information purposes only. Participants should refer to
the Plan document for a more complete description of the Plan. The Plan was
established effective January 1, 1999 to provide benefits to all eligible
employees of Gerald Stevens, Inc. and Subsidiaries (the "Company" or the "Plan
Sponsor"). The Plan is a defined contribution plan with a cash or deferred
arrangement under Section 401(k) of the Internal Revenue Code ("IRC"). The Plan
is subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). The Company's Employee Compensation and Benefits Committee is the
designated administrator of the Plan.
Eligibility
- -----------
All employees 21 years of age or older are eligible to participate in the Plan
once they have completed one year of service. If employees worked for an
employer acquired by the Company, the service with the prior employer is
recognized if employment continues for 90 days after the acquisition.
Contributions
- -------------
The Plan provides that participants may contribute a percentage of their annual
compensation within the limitations prescribed by the Internal Revenue Service
("IRS"). All contributions are participant-directed and may be invested in one
fund or allocated among different funds, subject to certain limitations set
forth in the Plan. Changes in allocation of contributions among funds are
permitted pursuant to Plan provisions. Individual participants' contributions
are limited to an annual maximum of $10,500 for the plan year ended December 31,
2000. The Company may contribute at its discretion, on behalf of each
participant, an amount equal to 50% of the participant's contributions, up to
the first 3% of the participant's salary.
Rollovers
- ---------
At the discretion of the Plan administrator, participants may transfer their
funds from other tax-qualified plans.
Plan Trustee
- ------------
The Company entered into an agreement whereby Merrill Lynch Trust Company (the
"Trustee") has been appointed the trustee of the Plan's assets. Under the terms
of the agreement, the Trustee holds and invests the funds of the Plan subject to
the direction of the Plan administrator. The Plan provided the following
distinct investment alternatives for participants in 2000 and 1999:
Merrill Lynch Retirement Preservation Trust Fund - a mutual fund that invests in
United States government agency securities, guaranteed investment contracts and
money market securities.
Merrill Lynch Equity Index Trust Fund - a trust fund that invests in a portfolio
of equity securities designed to substantially equal or match the performance of
the Standard & Poor's 500 Composite Stock Price Index.
Gerald Stevens, Inc. Common Stock - effective on November 1, 1999, the Plan
allows up to 100% of a participant's total contribution to be invested in the
Company's common stock.
Pacific Investment Management Company ("PIMCO") Total Return Fund - a mutual
fund that invests in a portfolio of fixed-income securities of intermediate term
bonds.
Global Asset Management ("GAM") International Fund - a mutual fund that invests
in equity and debt securities worldwide, excluding the United States.
Dreyfus Premier Balanced Fund - a mutual fund that invests in equity and
fixed-income securities of United States and foreign issuers.
Alliance Premier Growth Fund - a mutual fund that invests in a limited number of
large companies in the United States.
6
GERALD STEVENS, INC. 401(k) PLAN
--------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
Massachusetts Financial Services ("MFS") Capital Opportunities Fund - a mutual
fund that invests in moderate-growth companies.
Franklin Balance Sheet Investment Fund - a mutual fund that invests in
securities with low price-to-book value.
Massachusetts Investors Trust - a mutual fund that invests in stocks
representing well-known companies across a wide range of industries.
The Plan does not permit participant loans.
Participant Accounts
- --------------------
Each participant's account is credited with the participant's contributions and
the Company's matching contributions (if any) and an allocation of Plan earnings
and investment gains and losses. Allocations of Plan earnings and investment
gains and losses are based on actual participant account activity. The benefit
to which a participant is entitled is the benefit that can be provided from the
participant's vested account.
Vesting
- -------
Participants are vested immediately in their contributions plus actual earnings
thereon. The vesting schedule for employer contributions and actual earnings
thereon is as follows:
Years of Service Vested Percentage
---------------- -----------------
Less than 2 years 0%
2 years 20%
3 years 40%
4 years 60%
5 years 80%
6 years 100%
Participants can also become fully vested in their account (i) upon attainment
of age 65, (ii) upon termination of employment due to a "reduction in force,"
(iii) in the event of death, or (iv) in the event of total and permanent
disability. Upon termination of employment, participants are entitled to a full
distribution of their contributions and all vested Company match contributions;
all non-vested Company match contributions are forfeited. These forfeitures are
used to reduce future Company matching contributions. In 2000, forfeited
nonvested accounts totaled approximately $7,140.
Hardship Withdrawals
- --------------------
The Plan allows a participant to withdraw up to 100% of the participant's
contribution account for qualifying emergencies in accordance with the Plan
provisions and ERISA regulations.
Payment of Benefits
- -------------------
A participant may elect to receive an amount equal to the value of the
participant's vested interest in his or her account and any related earnings.
The Plan administrator will direct the Trustee to pay the participant's benefits
as a lump-sum amount equal to the value of the participant's vested interest in
his or her account.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------
Basis of Accounting
- -------------------
The financial statements of the Plan have been prepared on the accrual basis of
accounting. The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires the
Plan's management to use estimates and assumptions that affect the accompanying
financial statements and disclosures. Actual results could differ from these
estimates.
7
GERALD STEVENS, INC. 401(k) PLAN
--------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
Contributions and Benefit Payments
- ----------------------------------
Contributions are reflected on the accrual basis of accounting. Benefits paid
are presented using the cash basis of accounting in conformity with the American
Institute of Certified Public Accountants' AUDIT AND ACCOUNTING GUIDE FOR AUDITS
OF EMPLOYEE BENEFIT PLANS.
Investment Valuation and Income Recognition
- -------------------------------------------
The Plan's investments are stated at fair value. Quoted market prices are used
to value investments. Shares of mutual funds are valued at the net asset value
of shares held by the Plan at year-end. The net appreciation (depreciation) in
the fair value of the Plan's investments, which consists of the realized gains
or losses and the unrealized appreciation (depreciation) on those investments,
is presented in the statement of changes in net assets available for benefits.
Purchases and sales of investments are recorded on a trade-date basis. Dividends
are recorded on the ex-dividend date. Interest income is recorded as earned on
the accrual basis.
Risk and Uncertainties
- ----------------------
The Plan provides for various investment options in any combination of stocks
and mutual funds. The securities are exposed to various risks, such as interest
rate, market and credit. Due to the level of risk associated with the securities
and the level of uncertainty related to changes in the value of the securities,
it is at least reasonably possible that changes in risks in the near term would
materially affect participants' account balances and the amounts reported in the
accompanying financial statements.
Derivatives
- -----------
Derivative financial instruments are used in the Plan's GAM International Fund
primarily to hedge the currency risk component of the fund's foreign
investments. These derivatives involve market and/or credit risk in excess of
the amount recognized in the statement of net assets available for benefits.
Risks arise from the possible inability of counterparties to meet the terms of
their contracts and from unexpected movement in currencies, security values and
interest rates.
Guaranteed Investment Contracts
- -------------------------------
The Merrill Lynch Retirement Preservation Trust Fund invests in guaranteed
annuity contracts with insurance companies. The contracts are stated at contract
value. Contract value represents contributions made by participants, plus
interest at the contract rates, less withdrawals or transfers by participants.
3. INVESTMENTS
- --------------
The following presents investments that represent 5 percent or more of the
Plan's net assets as of December 31, 2000 and 1999:
2000 1999
--------- --------
(Unaudited)
Merrill Lynch Equity Index Trust Fund, 7,084 and
4,267 shares, respectively $ 650,068 $ 431,813
Merrill Lynch Retirement Preservation Trust Fund,
649,919 and 308,848 shares, respectively 649,919 308,848
Dreyfus Premier Balanced Fund, 29,641 and 21,464
shares, respectively 432,466 332,483
PIMCO Total Return Fund, 25,794 and 16,400
shares, respectively 268,002 162,360
Alliance Premier Growth Fund, 28,153 and 13,861
shares, respectively 751,973 505,933
MFS Capital Opportunities Fund, 20,873 and 10,824
shares, respectively 373,418 227,422
Massachusetts Investors Trust, 23,777 and 14,011
shares, respectively 476,008 293,539
The Plan's investments (including gains and losses on investments bought and
sold, as well as held during the year) depreciated in value by $685,431 in 2000
as follows:
Common Stock $(205,297)
Common/Collective Trusts (62,738)
Mutual Funds (401,677)
Realized loss on assets sold (15,719)
---------
$(685,431)
=========
8
GERALD STEVENS, INC. 401(k) PLAN
--------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
4. RECONCILIATION TO FORM 5500
- ------------------------------
There were no amounts allocated to withdrawing participants for benefits that
have been processed and approved for payment but have not yet been paid as of
December 31, 2000. Amounts allocated to withdrawing participants for benefits
that have been processed and approved for payment but have not yet been paid
totaled approximately $808 at December 31, 1999. Such amounts are included in
net assets available for benefits at December 31, 1999, in accordance with
American Institute of Certified Public Accountants guidelines. However, the
Plan's Form 5500 reflected such amount as a liability of the Plan in accordance
with IRC guidelines.
The following is a reconciliation of net assets available for benefits per the
financial statements to the Form 5500 as of December 31, 1999:
(Unaudited)
-----------
Net assets available for benefits per the financial statements $2,731,105
Less: Amounts allocated to withdrawing participants 808
Net assets available for benefits per amended Form 5500 $2,730,297
==========
5. ADMINISTRATIVE EXPENSES
- --------------------------
Costs of the Plan's administration are paid for by the Company and are excluded
from the financial statements. Such costs were $108,433 in 2000.
6. PLAN TERMINATION
- -------------------
Although it has not expressed an intention to do so, the Company may terminate
the Plan at any time. In the event the Plan is terminated or upon the complete
discontinuance of contributions by the Company under the Plan, participants
would become 100 percent vested in all amounts credited to their accounts.
7. RELATED-PARTY TRANSACTIONS
- -----------------------------
Certain Plan investments are shares of mutual funds managed by Merrill Lynch.
Merrill Lynch is the trustee as defined by the Plan and, therefore, these
transactions qualify as party-in-interest transactions. No fees were paid by the
Plan for investment management services for the year ended December 31, 2000.
Effective November 1, 1999 the Plan allows for investments in Gerald Stevens,
Inc. common stock.
8. INCOME TAX STATUS
- --------------------
The IRS issued a favorable determination letter in 1995 for the prototype plan
for which the Plan is modeled after. The Plan administrator believes that the
Plan is designed and is currently being operated in compliance with the
applicable requirements of the IRC. Accordingly, income taxes are not provided
for in the accompanying financial statements. Participants are liable for
federal income taxes relative to their Section 401(k) contributions, the Company
match contributions, and the earnings of the Plan when the contributions are
distributed to them.
9. EXCESS EMPLOYEE CONTRIBUTIONS
- --------------------------------
During 2000 and 1999, the Plan failed the Average Deferral Percentage ("ADP")
nondiscrimination test. To correct the failed test related to the 2000 Plan
year, excess contributions of $196,815 will be returned to participants during
2001. As of December 31, 2000, the Plan has reflected this liability in the
Statement of Net Assets Available for Benefits as "due to participants," and in
the Statement of Changes in Net Assets Available for Benefits for the year then
ended as "corrective distributions." To correct the failed test related to the
1999 Plan year, excess contributions of $33,571 were returned to participants
during 2000.
9
GERALD STEVENS, INC. 401(k) PLAN
--------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
10. CHAPTER 11 BANKRUPTCY OF PLAN SPONSOR
- ------------------------------------------
On April 23, 2001, the Plan Sponsor filed voluntary petitions for itself and
certain of its subsidiaries (the "Debtors") under Chapter 11 of the United
States Bankruptcy Code (the "Bankruptcy Code") in the United States Bankruptcy
Court in Miami, Florida (the "Chapter 11 Cases"). The Chapter 11 Cases have been
substantively consolidated, and the cases are being administered jointly. The
Debtors continue to operate the business and manage their property as
debtors-in-possession pursuant to sections 1107 and 1108 of the Bankruptcy Code.
The commencement of the Chapter 11 Cases and continuing operating losses and
negative cash flows experienced by the Company raise substantial doubt about the
Company's ability to continue as a going concern. The continuation of the
Company's business as a going concern is contingent upon, among other things,
the ability to (i) formulate a plan of reorganization that will be confirmed by
the Bankruptcy Court, (ii) achieve satisfactory levels of future profitable
operations, (iii) maintain adequate financing, and (iv) generate sufficient cash
from operations and divestments to meet future obligations. The Company plans to
develop a plan of reorganization for submission to the Bankruptcy Court. If the
Company fails to file a plan of reorganization within a future time period to be
specified, or, after such plan has been filed, if the Company fails to obtain
acceptance of such plan from the requisite impaired classes of creditors and
equity security holders during the exclusive period, any party-in-interest,
including a creditor, an equity security holder, a committee of creditors or
equity security holders, or an indenture trustee, may file their own plan of
reorganization for the Company.
The accompanying financial statements have been prepared assuming that the Plan
will continue as a going concern. However, because of the Plan Sponsor's
financial difficulties, there is substantial doubt about whether the Plan will
continue as a going concern. The accompanying financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
11. SUBSEQUENT EVENT
- ---------------------
The market value of the Gerald Stevens, Inc. common stock has declined
significantly in value since December 31, 2000.
10
SUPPLEMENTAL SCHEDULE
- ---------------------
GERALD STEVENS, INC. 401(k) PLAN
--------------------------------
SCHEDULE H, PART IV, LINE 4I OF FORM 5500
-----------------------------------------
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
-----------------------------------------------
AS OF DECEMBER 31, 2000
-----------------------
Identity of Market
Party Involved Description of Investment Cost Value
- -------------- ------------------------- ---- ---------
*Gerald Stevens, Inc. Gerald Stevens, Inc. Common Stock $ 239,887 $ 29,958
*Merrill Lynch Merrill Lynch Equity Index Trust Fund 659,117 650,068
*Merrill Lynch Merrill Lynch Retirement Preservation Trust Fund 649,919 649,919
GAM GAM International Fund 209,043 164,007
Dreyfus Dreyfus Premier Balanced Fund 450,791 432,466
PIMCO PIMCO Total Return Fund 260,849 268,002
Alliance Capital Alliance Premier Growth Fund 949,368 751,973
MFS MFS Capital Opportunities Fund 419,564 373,418
Franklin Templeton Franklin Balance Sheet Investment Fund 121,627 136,987
MFS Massachusetts Investors Trust 485,395 476,008
*Merrill Lynch Accrued income 2,856 2,856
---------- ----------
$4,448,416 $3,935,662
* Denotes a Party-in-Interest
11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Administrator has duly caused this annual report to be signed on its behalf by
the undersigned thereunto duly authorized.
Gerald Stevens, Inc. 401(k) Plan
By: Gerald Stevens, Inc.
Its: Administrator
By: /s/ Thomas W. Hawkins
----------------------------
Thomas W. Hawkins, Sr. VP
Date: June 29, 2001
12