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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------
 
                                   FORM 10-K
(MARK ONE)
 
/X/    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
       ACT OF 1934 (Fee Required) For the fiscal year ended January 3, 1998
 
                                       OR
 
/ /    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934 (No Fee Required)
     For the transition period from ____________ to ____________.
 
                         COMMISSION FILE NUMBER 1-11908
 
                              DEPARTMENT 56, INC.
             (Exact name of registrant as specified in its charter)
 
<TABLE>
<S>                                   <C>
              DELAWARE                   13-3684956
  (State or other jurisdiction of     (I.R.S. Employer
   incorporation or organization)      Identification
                                            No.)
 
         ONE VILLAGE PLACE                  55344
       6436 CITY WEST PARKWAY            (Zip Code)
          EDEN PRAIRIE, MN
  (Address of principal executive
              offices)
</TABLE>
 
                                 (612) 944-5600
              (Registrant's telephone number, including area code)
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
 
<TABLE>
<CAPTION>
                                                       NAME OF EACH EXCHANGE
              TITLE OF EACH CLASS                       ON WHICH REGISTERED
------------------------------------------------  -------------------------------
<S>                                               <C>
     Common Stock, par value $.01 per share           New York Stock Exchange
</TABLE>
 
        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 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/.
 
    The aggregate market value of the voting stock held by non-affiliates of the
registrant was approximately $645,113,352 of March 20, 1998 (based on the
closing price of consolidated trading in the Common Stock on that date as
published in MICROSOFT INVESTOR). For purposes of this computation, shares held
by affiliates and by directors and officers of the registrant have been
excluded. Such exclusion of shares held by directors and officers is not
intended, nor shall it be deemed, to be an admission that such persons are
affiliates of the registrant.
 
    Number of Shares of Common Stock, par value $.01 per share, outstanding as
of March 20, 1998: 19,149,160
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 
    Portions of the Company's Annual Report to Stockholders for the fiscal year
ended January 3, 1998 (the "1997 Annual Report") are incorporated by reference
in Parts II and IV. Portions of the Company's definitive Proxy Statement for the
1998 Annual Meeting of Stockholders filed with the Securities and Exchange
Commission concurrently with this Form 10-K (the "1998 Proxy Statement") are
incorporated by reference in Part III.
 
--------------------------------------------------------------------------------
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<PAGE>
                                     PART I
 
ITEM 1.  BUSINESS
 
    GENERAL
 
    Department 56, Inc. (including its direct and indirect subsidiaries,
"Department 56" or the "Company") is a leading designer, importer and
distributor of fine quality collectibles and other giftware products sold
through gift, home accessory and specialty retailers. The Company is best known
for its Village Series of collectible, handcrafted, lit ceramic and porcelain
houses, buildings and related accessories in the Original Snow Village
Collection and The Heritage Village Collection as well as its extensive line of
holiday and home decorative accessories, including its Snowbabies collectible
porcelain and pewter handpainted figurines.
 
    The Company was incorporated in Delaware in 1992 to hold the equity of a
Minnesota corporation formed in 1984 under the name "Department 56, Inc.," which
has since changed its name to "D 56, Inc." and has continued as the Company's
principal operating subsidiary.
 
    PRODUCTS
 
    VILLAGE SERIES PRODUCTS.  Department 56 is best known for its Village
Series, several series of collectible, handcrafted, lit ceramic and porcelain
houses, buildings and related accessories that depict nostalgic winter scenes.
The Company introduces new lit pieces, limited edition pieces, figurines and
other accessories each year to complement the collections. To allow for these
new introductions and to keep each series appropriately balanced, the Company
has traditionally retired a number of its existing pieces from production each
year. Retirement decisions are based on management's judgment as to, among other
things, expected consumer demand, whether a piece continues to fit the evolving
design characteristics of a series and manufacturing considerations.
 
    The Company's Village Series products are comprised of two broad
collections: The Original Snow Village Collection and The Heritage Village
Collection. The Original Snow Village Collection, introduced in 1976, consists
of lit ceramic houses and accessories designed around a single "Main Street
U.S.A." theme. The Heritage Village Collection, introduced in 1984 and expanded
since that time, consists of lit porcelain houses and accessories designed
around several different village themes. By using porcelain for The Heritage
Village Collection products, the Company has been able to achieve a higher level
of detail, in a smaller scale product, than would have been possible by using
ceramic.
 
    VILLAGE ACCESSORIES.  Department 56 also produces a range of accessories for
its villages, including figurines, vehicles, musical tapes, lighting and other
decorative items. The sale of accessories for its Village Series is an important
part of the Company's strategy to encourage the continued purchase of its
products. Accessories allow collectors to refresh their collections by changing
their displays and by creating personalized settings. Many of the accessories
can be used interchangeably between the various villages, although certain
accessories are designed uniquely for specific villages.
 
    GENERAL GIFTWARE.  The Company offers a wide range of other decorative
giftware and home accessory items, including the Company's Snowbabies and
Snowbunnies figurines, Christmas and Easter decorative items, tableware,
decorative tins, acrylics and gift bags. Department 56 develops these decorative
giftware and home accessories both to satisfy specific consumer demand and to
introduce new product concepts that may develop into important product lines for
the Company in the future. Snowbabies figurines, originally introduced in 1987
as part of the Company's general Christmas collection, rapidly became a popular
product line and subsequently have achieved their own collectible status.
General Giftware products are generally offered as a line of products developed
around a central design theme. The Company updates its product offerings twice a
year and currently maintains an aggregate of approximately 3,300 stock keeping
units, of which approximately 2,800 are General Giftware products.
 
                                       2
<PAGE>
    CUSTOMERS
 
    The Company's principal customers (accounting for approximately 90% of its
sales) are approximately 19,000 independent gift retailers across the United
States. These retailers include approximately 1,500 independently owned Gold Key
and Showcase Dealers, who receive special recognition and qualify for improved
sales terms, and who must satisfy certain requirements, such as maintaining the
Company's products on display in an attractive setting for at least six months.
Occasionally, a particular product will be sold exclusively through certain
dealers. Approximately 10% of the Company's sales are made to department stores
and mail order houses. No single account represented more than 3% of the
Company's sales in fiscal 1997. The Company provides volume discounts to its
customers with respect to most of its products. The Company has generally had
only limited sales outside the United States. International sales were
approximately 1% of the Company's sales in fiscal 1997, and the Company does not
expect to materially increase international sales in fiscal 1998.
 
    As part of the Company's strategy of selective distribution, only
approximately 5,200 retailers receive the Company's Village Series and
Snowbabies products. Certain of the Company's lit Village Series products and
porcelain Snowbabies figurines have been sold on allocation for each of the last
ten years and seven years, respectively. The Company periodically evaluates and
adjusts its distribution network, and reviews its dealership policies with a
view of optimizing both the Company's distribution strategy and the store-level
operations of its independent dealers.
 
    MARKETING AND ADVERTISING
 
    Department 56 sells its products through 10 independently operated wholesale
showrooms (including showrooms in New York and Dallas) and four corporate
showrooms which cover the major giftware market areas in the United States and
Canada. The Company's headquarters in Eden Prairie, Minnesota has a 10,000
square-foot atrium showroom where all of its products, including retired Village
Series lighted pieces and Snowbabies figurines, are displayed. The Company also
has a corporate showroom of approximately 13,000 square feet at the Atlanta,
Georgia gift mart, a corporate showroom of approximately 7,500 square feet at
the Chicago, Illinois gift mart, and a corporate showroom of approximately 6,600
square feet at the Los Angeles, California gift mart. In addition, the Company
sells through giftware shows throughout the United States. Tests have been
conducted of product sales through home television shopping and through
corporate gift programs. The Company intends to maintain flexibility in its
marketing and distribution strategies in order to take advantage of
opportunities that may develop in the future (including the establishment and
operation of retail stores so as to build consumer awareness).
 
    The Company advertises its products to retailers principally through trade
journals, giftware shows and brochures, and provides merchandising and product
information to its collectible product dealers through a periodical newsletter.
It advertises to consumers through brochures, point of sale information and
seasonal advertisements in magazines and newspapers. The Company has also
expanded its consumer advertising through use of cooperative advertising with
its Gold Key Dealers using various media formats. In addition, the Company
publishes and sells a quarterly newsletter, which contains product-related
articles and description of its product lines, to subscriber groups and others,
and maintains an interactive consumer information center on an Internet web
site. Department 56 maintains a toll-free telephone line for collector questions
and participates in collector conventions.
 
    DESIGN AND PRODUCTION
 
    The Company has an ongoing program of new product development. Each year,
the Company introduces new products in its existing product lines and also
develops entirely new design concepts. The Company endeavors to develop new
products which, although not necessarily similar to the products currently
marketed by the Company, fit the Company's quality and pricing criteria and can
be distributed through the Company's existing marketing and distribution system.
 
    Department 56 believes that its relationships with its manufacturers, and
the quality of their craftsmanship, provide a competitive advantage and are a
significant contributor to the Company's success. The
 
                                       3
<PAGE>
Company imports most of its products from the Pacific Rim, primarily The
People's Republic of China, Taiwan (Republic of China) and The Philippines. The
Company also imports a small percentage of its products from sources in India,
and occasionally from sources in Europe (primarily Italy, England and Poland).
In fiscal 1997, the Company imported products from approximately 150 independent
manufacturing sources. The Company's single largest manufacturing source
represented approximately 10% of the Company's imports in fiscal 1997. The
Company's emphasis on high quality craftsmanship at affordable prices limits the
sources from which the Company chooses to obtain products. The Company has long-
standing relationships with the majority of its manufacturers (several for ten
years or more) and often purchases (typically on a year-to-year basis) a
manufacturer's entire output for a year. As a result of these relationships, the
Company has experienced a low turnover of its manufacturing sources.
 
    The Company's wholly owned indirect subsidiary, Department 56 Trading Co.,
Ltd., the principal operations of which are based in Taiwan, sources many of the
Company's products in the Pacific Rim, monitors and coordinates production and
assists in the export of the Company's products to the United States. The
Company believes that this overseas subsidiary provides the Company with greater
product and quality control, at a lower cost, than would be available from a
third party trading company. The Company also purchases products, to a limited
extent, from selected independent trading companies operating in particular
geographic regions.
 
    The design and manufacture of the Company's Village Series products are
complex processes. The path from final conception of the design idea to market
introduction typically takes approximately 18 months. Products other than the
Company's collectibles lines can generally be introduced within a few months
after a decision is made to produce the product. The Company's Village Series
products are principally composed of ceramic and porcelain clays and the
Company's other products are designed in a variety of media, including paper,
ceramic and porcelain.
 
    DISTRIBUTION AND SYSTEMS
 
    The products sold by the Company in the United States are generally shipped
by ocean freight from abroad and then by rail to the Company's two automated
warehouse and distribution centers, each located within 10 miles of the other in
the southwest quadrant of the Minneapolis/St. Paul metropolitan area. The
Bloomington facility is dedicated to the warehousing and distribution of Village
Series lit pieces, while the Eden Prairie facility handles all other products.
Shipments from the Company to its customers are handled by United Parcel Service
or commercial trucking lines.
 
    The Company utilizes computer systems to maintain efficient order processing
from the time a product enters the Company's system through shipping and
ultimate payment collection from its customers. The Company also uses handheld
optical scanners and bar coded labels in accepting orders at wholesale showrooms
throughout the United States. In addition, uniform computer and communication
software systems allow on-line information access between the Company's
headquarters and its showrooms, and those systems generally provide direct
linkage with the Company's field salesforce. The Company believes its complex
yet efficient software for the processing and shipment of orders from its
central warehouse allows it to better serve its retail customer base.
 
    BACKLOG AND SEASONALITY
 
    The Company receives products, pays its suppliers and ships products
throughout the year, although the majority of shipments occur in the second and
third quarters of each year as retailers stock merchandise in anticipation of
the winter holiday season. The Company continues to ship merchandise until
mid-December each year. Accordingly, the Company's backlog typically is lowest
at the beginning of January. As of January 3, 1998, Department 56 had unfilled
wholesale orders of approximately $4.6 million, compared to $7.2 million at
December 28, 1996. All of the backlog is scheduled to be shipped to customers
during the current fiscal year. Approximately 6% to 8% of the Company's total
annual customer orders have been cancelled in each of the last three years for a
number of reasons, including customer credit considerations, inventory shortages
or customer cancellation requests.
 
                                       4
<PAGE>
    Department 56 experiences a significant seasonal pattern in its working
capital requirements and operating results. During the first quarter of each of
the last three years, the Company received orders ranging from approximately 66%
to 76% of its annual orders for such year. The Company offers extended payment
terms to many of its customers for seasonal merchandise. Accordingly, the
Company collects a substantial portion of its accounts receivable in the fourth
quarter. Due to the seasonal pattern of shipping and accounts receivable
collection, the Company generally has had greater working capital needs in its
second and third quarters and has experienced greater cash availability in its
fourth quarter. The Company typically finances its operations through net cash
and marketable securities balances, internally generated cash flow and
short-term seasonal borrowings. As a result of the Company's sales pattern, the
Company has historically recorded a substantial portion of its revenues in its
second and third quarters. The Company expects this seasonal sales pattern to
continue for the foreseeable future.
 
    TRADEMARKS AND OTHER PROPRIETARY RIGHTS
 
    The Company owns eleven U.S. trademark registrations and has pending U.S.
trademark applications with respect to certain of its logos and brandnames. In
addition, the Company from time to time registers selected trademarks in certain
foreign countries.
 
    Department 56 regards its trademarks and other proprietary rights as
valuable assets and intends to maintain and renew its trademarks and their
registrations and vigorously defend against infringement. The U.S. registrations
for the Company's trademarks are currently scheduled to expire or be cancelled
at various times between 2002 and 2008, but can be maintained and renewed
provided that the marks are still in use for the goods and services covered by
such registrations.
 
    COMPETITION
 
    Department 56 competes generally for the disposable income of consumers and,
in particular, with other producers of fine quality collectibles, specialty
giftware and home decorative accessory products. The collectibles area, in
particular, is affected by changing consumer tastes and interests. The giftware
industry is highly competitive, with a large number of both large and small
participants. The Company's competitors distribute their products through
independent gift retailers, department stores, televised home shopping networks
and mail order houses or through direct response marketing. The Company believes
that the principal elements of competition in the specialty giftware industry
are product design and quality, product and brand-name loyalty, product display
and price. The Company believes that its competitive position is enhanced by a
variety of factors, including the innovativeness, quality and enduring themes of
the Company's products, its reputation among retailers and consumers, its
in-house design expertise, its sourcing and marketing capabilities and the
pricing of its products. Some of the Company's competitors, however, are part of
large, diversified companies having greater financial resources and a wider
range of products than the Company.
 
    RESTRICTIONS ON IMPORTS
 
    The Company does not own or operate any manufacturing facilities and imports
most of its products from manufacturers in the Pacific Rim, primarily The
People's Republic of China, Taiwan and The Philippines. The Company also imports
a small percentage of its products from sources in India, and occasionally from
sources in Europe (primarily Italy, England and Poland).
 
    The Company's ability to import products and thereby satisfy customer orders
is affected by the availability of, and demand for, quality production capacity
abroad. The Company competes with other importers of specialty giftware products
for the limited number of foreign manufacturing sources which can produce
detailed, high-quality products at affordable prices. The Company is subject to
the following risks inherent in foreign manufacturing: fluctuations in currency
exchange rates; economic and political instability; cost fluctuations and delays
in transportation; restrictive actions by foreign governments; nationalizations;
the laws and policies of the U.S. affecting importation of goods (including
duties, quotas and taxes); and foreign trade and tax laws. In particular, the
Company's costs could be adversely affected if
 
                                       5
<PAGE>
the currencies of other countries in which the Company sources product
appreciate significantly relative to the U.S. dollar.
 
    Substantially all of the Company's products are subject to customs duties
and regulations pertaining to the importation of goods, including requirements
for the marking of certain information regarding the country of origin on the
Company's products. In the ordinary course of its business, from time to time,
the Company is involved in disputes with the U.S. Customs Service regarding the
amount of duty to be paid, the value of merchandise to be reported or other
customs regulations with respect to certain of the Company's imports, which may
result in the payment of additional duties and/or penalties, or which may result
in the refund of duties to the Company.
 
    The United States and the countries in which the Company's products are
manufactured may, from time to time, impose new quotas, duties, tariffs or other
charges or restrictions, or adjust presently prevailing quotas, duty or tariff
levels, which could adversely affect the Company's financial condition or
results of operations or its ability to continue to import products at current
or increased levels. In particular, the Company's costs may be increased, or the
mix of countries from which it sources its products may be changed, in the
future if countries which are currently accorded "Most Favored Nation" status by
the United States cease to have such status or the United States imposes
retaliatory duties against imports from such countries. The Company cannot
predict what regulatory changes may occur or the type or amount of any financial
impact on the Company which such changes may have in the future.
 
    In fiscal 1997, approximately 65% (as compared to approximately 50% in
fiscal 1996) of the Company's imports were manufactured in The People's Republic
of China, which is currently accorded "Most Favored Nation" status and generally
is not subject to U.S. retaliatory duties. The Company expects that the
proportion of its products manufactured in The People's Republic of China will
increase in the future. Various commercial and legal practices widespread in The
People's Republic of China, including the handling of intellectual properties,
as well as certain political and military actions taken or suggested by The
People's Republic of China in relation to Taiwan and residents of Hong Kong, are
under review by the United States government and, accordingly, the duty
treatment of goods imported from The People's Republic of China is subject to
political uncertainties. To the extent The People's Republic of China may cease
to have "Most Favored Nation" status or its exports may be subject to political
retaliation, the cost of importing products from such country would increase
significantly, and the Company believes that there could be a short-term adverse
effect on the Company until alternative manufacturing arrangements were
obtained.
 
    EMPLOYEES
 
    As of January 3, 1998, the Company had 205 full-time employees in the United
States and 7 full-time employees in Taiwan. All of the Company's 65 U.S.-based
warehouse, shipping and receiving personnel employed as of that date are
represented by Local Union No. 638 of the Teamsters under a contract that
expired on December 31, 1997. The Company is in the process of negotiating a new
contract. The Company believes that its labor relations are good and has never
experienced a work stoppage.
 
    ENVIRONMENTAL MATTERS
 
    The Company is subject to various Federal, state and local laws and
regulations governing the use, discharge and disposal of hazardous materials.
Compliance with current laws and regulations has not had and is not expected to
have a material adverse effect on the Company's financial condition. It is
possible, however, that environmental issues may arise in the future which the
Company cannot now predict.
 
ITEM 2.  PROPERTIES
 
    The Company owns a 67,000 square-foot facility in Eden Prairie, Minnesota,
which includes 57,000 square feet of office space. Its executive offices,
creative center and primary corporate showroom are located in this facility,
which is known as "One Village Place." The Company currently occupies
approximately 66,400 square feet of the facility and leases the remaining 600
square feet to others.
 
                                       6
<PAGE>
    The Company leases a warehouse and distribution facility in Eden Prairie of
approximately 150,000 square feet. The current lease for this facility expires
on March 31, 2001 and is extendible at the Company's option for an additional
five years. The Company also leases a warehouse and distribution facility in
Bloomington, Minnesota of approximately 159,000 square feet, the lease for which
expires on February 28, 1999 and is extendible at the Company's option for an
additional three years. Nearby the Bloomington distribution facility is
additional bulk storage warehouse space of approximately 52,000 square feet, the
Company's lease for which expires on February 28, 1999 and is extendible at the
Company's option for an additional three years. The Company believes that its
current facilities are adequate to support its needs. However, the Company
continuously evaluates its need for additional facilities. The Company also
leases a corporate showroom of approximately 13,000 square feet in the Atlanta,
Georgia gift mart, a corporate showroom of approximately 7,500 square feet in
the Chicago, Illinois gift mart, and a corporate showroom of approximately 6,600
square feet in the Los Angeles, California gift market. These leases expire on
December 31, 2006, November 30, 1999, and December 31, 2002, respectively.
 
ITEM 3.  LEGAL PROCEEDINGS
 
    The Company is involved in various legal proceedings, claims and
governmental audits in the ordinary course of its business. In the opinion of
the Company's management, the ultimate disposition of these proceedings, claims
and audits will not have a material adverse effect on the financial position or
results of operations of the Company.
 
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
    No matters were submitted to a vote of the Company's security holders during
the last quarter of the year ended January 3, 1998.
 
ADDITIONAL ITEM.  EXECUTIVE OFFICERS OF THE REGISTRANT
 
    Set forth below are the executive officers of the Company as of the date
hereof. Unless otherwise indicated each executive officer of the Company holds
identical positions with D 56, Inc. Officers serve at the discretion of the
Board of Directors.
 
<TABLE>
<CAPTION>
       NAME          AGE               POSITION(S) WITH THE COMPANY
-------------------  ---   ----------------------------------------------------
 
<S>                  <C>   <C>
Susan E. Engel        51   Chairwoman of the Board and Chief Executive Officer
 
Mark R. Kennedy       40   Senior Vice President and Chief Financial Officer
 
David H. Weiser       38   Senior Vice President -- Legal/Human Resources,
                            General Counsel and Secretary
 
David W. Dewey        40   Executive Vice President -- Overseas Operations
 
Brett D. Heffes       30   Vice President -- Corporate Development
 
Robert S. Rose        43   Vice President -- Distribution and Operations
 
Timothy J. Schugel    39   Vice President -- Finance and Principal Accounting
                            Officer
 
Joan M. Serena        44   Vice President -- Consumer & Dealer Marketing
 
Kenneth J. Sobaski    42   Executive Vice President -- Sales and Marketing
 
Gregory G. Sorensen   35   Vice President -- Management Information Systems
</TABLE>
 
    The principal occupations and positions for the past five years, and in
certain cases prior years, of each of the executive officers of the Company are
as follows:
 
    Susan E. Engel has been Chairwoman of the Board of the Company and of D 56,
Inc. since September 18, 1997 and Chief Executive Officer of the Company and of
D 56, Inc. since November 13, 1996. Ms. Engel was President of the Company and
of D 56, Inc. from September 19, 1994 until
 
                                       7
<PAGE>
September 18, 1997, and Chief Operating Officer of the Company and of D 56, Inc.
from September 19, 1994 until November 13, 1996. Ms. Engel was a consultant to
retail and consumer goods companies from September 1993 until September 1994,
and Chief Executive Officer and President of Champion Products, Inc. (a
manufacturer of athletic and active sports apparel) from October 1991 to
September 1993.
 
    Mark R. Kennedy has been Senior Vice President of the Company and of D 56,
Inc. since January 1, 1997 and Chief Financial Officer of the Company and of D
56, Inc. since April 25, 1995. He was Vice President -- Administration of the
Company and of D 56, Inc. from April 25, 1995 until January 1, 1997. From
January 1995 until April 25, 1995, Mr. Kennedy was a private investor. Mr.
Kennedy was Senior Executive Vice President of Shopko Stores, Inc. (a "mass
market" department store chain) from June 1993 to January 1995, and its Senior
Vice President and Chief Financial Officer from February 1992 to June 1993.
 
    David H. Weiser has been Senior Vice President -- Legal/Human Resources of
the Company and of D 56, Inc. since January 1, 1997. He has also been General
Counsel of the Company since April 22, 1993, General Counsel of D 56, Inc. since
March 15, 1993, and Secretary of the Company and of D 56, Inc. since February
1993. Mr. Weiser was Vice President of the Company from April 22, 1993 until
January 1, 1997 and Vice President of D 56, Inc. from March 15, 1993 until
January 1, 1997.
 
    David W. Dewey has been Senior Vice President -- Overseas Operations of the
Company and of D 56, Inc. since January 1, 1997. He was Vice President --
Overseas Operations of the Company and of D 56, Inc. from April 22, 1993 until
January 1, 1997. Mr. Dewey was Vice President of Marketing of D 56, Inc. from
March 1990 until April 22, 1993.
 
    Brett D. Heffes has been Vice President -- Corporate Development of the
Company and of D 56, Inc. since January 5, 1998. He was associated with Wessels,
Arnold & Henderson, a private investment bank, from May 1992 until January 1998,
most recently as Principal.
 
    Robert S. Rose has been Vice President -- Distribution and Operations of the
Company and of D 56, Inc. since April 22, 1993. Mr. Rose was Vice President of
Operations of D 56, Inc. from September 1988 until April 22, 1993.
 
    Timothy J. Schugel has been Vice President -- Finance of the Company and of
D56, Inc. since April 10, 1995, and was Controller of the Company and of D 56,
Inc. from April 26, 1993 until April 10, 1995. He was a Senior Manager/Manager
with the public accounting firm of Deloitte & Touche LLP from 1986 until April
24, 1993.
 
    Joan M. Serena has been Vice President -- Consumer & Dealer Marketing of the
Company and of D 56, Inc. since January 1, 1997. She was Vice President --
Consumer & Retail Marketing of the Company and of D 56, Inc. from October 20,
1995 until January 1, 1997. She was Vice President -- Consumer Services of the
Company and of D 56, Inc. from April 22, 1993 until October 20, 1995. Ms. Serena
was Vice President, Sales Services of D 56, Inc. from June 1992 until April 22,
1993.
 
    Kenneth J. Sobaski has been Executive Vice President -- Sales and Marketing
of the Company and of D 56, Inc. since November 3, 1997. From August 1997 to
November 1997, Mr. Sobaski was a private investor. He was Vice President, Sales
and Customer Service of The Pillsbury Company (food products) from March 1995 to
August 1997, its Vice President, General Manager, Refrigerated Baked Goods from
December 1993 to March 1995, and its Vice President, General Manager, Green
Giant from October 1992 to December 1993.
 
    Gregory G. Sorensen has been Vice President -- Management Information
Systems of the Company and of D 56, Inc. since July 22, 1996. He was Vice
President of Information Systems of Tsumura International, Inc. (a distributor
of consumer soaps and toiletries) from October 1991 until July 12, 1996, and a
consultant to D 56, Inc. from July 12, 1996 until July 22, 1996.
 
                                       8
<PAGE>
                                    PART II
 
ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
    Information required by this Item is included in Corporate and Stockholder
Information on page 25 of the 1997 Annual Report and Note 6 to Five Year Summary
on page 7 of the 1997 Annual Report, and such information is incorporated herein
by reference.
 
    As of March 20, 1998, the number of holders of record of the Company's
Common Stock was 1,031.
 
ITEM 6.  SELECTED FINANCIAL DATA
 
    Information required by this Item is included in Five Year Summary on page 7
of the 1997 Annual Report, and such information is incorporated herein by
reference. See also the notes to the consolidated financial statements and
Management's Discussion and Analysis on pages 16 to 23 and 8 to 12 respectively,
of the 1997 Annual Report, and such information is incorporated herein by
reference.
 
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS
 
    Information required by this Item is included in Management's Discussion and
Analysis on pages 8 to 12 of the 1997 Annual Report, incorporated herein by
reference.
 
ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
 
    Not applicable.
 
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
    Information required by this Item is included in the consolidated financial
statements of the Company for the years ended January 3, 1998, December 28, 1996
and December 30, 1995, the notes to the consolidated financial statements, and
the report of independent auditors thereon on pages 13 to 24 of the 1997 Annual
Report, and in the Company's unaudited quarterly financial data for the years
ended January 3, 1998 and December 28, 1996 on page 10 of the 1997 Annual
Report, incorporated herein by reference.
 
ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE
 
    None.
 
                                       9
<PAGE>
                                    PART III
 
ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 
    Information required by this Item concerning directors of the Company who
are nominated by the Company for re-election at the 1998 annual meeting of the
Company's stockholders is included in the 1998 Proxy Statement in the section
captioned "Item 1 -- Election of Directors," and such information is
incorporated herein by reference. Information required by this Item concerning
the executive officers of the Company is included in Part I, pages 7 and 8 of
this Annual Report on Form 10-K as permitted by General Instruction G(3) to Form
10-K. Information required by this Item concerning compliance with Section 16(a)
of the Securities Exchange Act of 1934 is included in the 1998 Proxy Statement
in the last paragraph of the section captioned "Security Ownership of Certain
Beneficial Owners and Management," and such information is incorporated herein
by reference.
 
    The principal occupations and positions for the past five years, and in
certain cases prior years, of each of the current directors of the Company who
are not nominated for re-election at the 1998 annual meeting of stockholders are
as follows:
 
    Todd L. Bachman, age 52, has been a director of the Company since October
1992. Mr. Bachman has been Chairman and Chief Executive Officer of Bachman's,
Inc. (a floral and nursery wholesaler and retailer), since November 1, 1994. Mr.
Bachman was Vice Chairman of the Board and President of the Company and of D 56,
Inc. from April 22, 1993 until September 19, 1994. Mr. Bachman was Chief
Executive Officer of D 56, Inc. from January 1992 until April 22, 1993.
 
    Sandra J. Horbach, age 37, has been a director of the Company since October
1992. Ms. Horbach has been a General Partner of FLC Partnership, L.P., the
General Partner of Forstmann Little & Co. (a private investment firm), since
January 1993. She is a director of Gulfstream Aerospace Corp.
 
ITEM 11.  EXECUTIVE COMPENSATION
 
    Information required by this Item is included in the 1998 Proxy Statement in
the section captioned "Further Information Concerning the Board of the Directors
and Committees -- Compensation Committee Interlocks and Insider Participation"
and "-- Director Compensation" and in the section captioned "Compensation of
Executive Officers" (other than the subsection thereof captioned "Compensation
Committee Report on Executive Compensation" and "Performance Graph"), and such
information (other than the subsections thereof captioned "Compensation
Committee Report on Executive Compensation" and "Performance Graph") is
incorporated herein by reference.
 
ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
    Information required by this Item is included in the 1998 Proxy Statement in
the section captioned "Security Ownership of Certain Beneficial Owners and
Management", and such information is incorporated herein by reference.
 
ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
    Information required by this Item is included in the 1998 Proxy Statement in
the section captioned "Certain Related Party Transactions," and such information
is incorporated herein by reference. See also, Note 9 to the consolidated
financial statements on page 20 of the 1997 Annual Report.
 
                                       10
<PAGE>
                                    PART IV
 
ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
 
<TABLE>
<CAPTION>
                                                                                                                     1997
                                                                                                     FORM 10-K   ANNUAL REPORT
                                                                                                       (PAGE)       (PAGE)
                                                                                                     ----------  -------------
<C>        <S>        <C>        <C>                                                                 <C>         <C>
   (a)     1.         FINANCIAL STATEMENTS
                      Consolidated Balance Sheets at January 3, 1998 and December 28, 1996                            13
 
                      For the years ended January 3, 1998, December 28, 1996 and December 30, 1995:
 
                      Consolidated Statements of Income                                                               14
 
                      Consolidated Statements of Cash Flows                                                           15
 
                      Consolidated Statements of Stockholders' Equity                                                 16
 
                      Notes to Consolidated Financial Statements                                                     16-23
 
                      Independent Auditors' Report for the years ended                                                24
                      January 3, 1998, December 28, 1996 and December 30, 1995
 
           2.         FINANCIAL STATEMENT SCHEDULES
 
                                 Independent Auditors' Report                                            12
                      I.         Condensed financial information                                       13-15
                      II.        Valuation and qualifying accounts                                       16
</TABLE>
 
    All other schedules have been omitted because they are not applicable, not
required or the information required is included in the consolidated financial
statements or notes thereto.
 
<TABLE>
<C>        <S>        <C>        <C>                                                    <C>        <C>
           3.         EXHIBITS
</TABLE>
 
    The exhibits are listed in the accompanying Index to Exhibits on pages 19
and 20.
 
<TABLE>
<C>        <S>        <C>        <C>                                                    <C>        <C>
   (b)     Reports on Form 8-K
</TABLE>
 
    None.
 
                                       11
<PAGE>
                          INDEPENDENT AUDITORS' REPORT
 
    To the Board of Directors and Stockholders of
Department 56, Inc.:
 
We have audited the consolidated balance sheets of Department 56, Inc. and
subsidiaries (the "Company") as of January 3, 1998 and December 28, 1996 and the
related consolidated statements of income, cash flows and stockholders' equity
for the years ended January 3, 1998, December 28, 1996 and December 30, 1995,
and have issued our report thereon dated February 12, 1998 (included in the
Company's Annual Report to Stockholders for the year ended January 3, 1998 and
incorporated herein by reference). Our audits also included the financial
statement schedules for the aforementioned periods listed in Item 14 of Form
10-K. These financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statement schedules based on our audits. In our opinion, such
financial statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.
 
Deloitte & Touche LLP
Minneapolis, Minnesota
February 12, 1998
 
                                       12
<PAGE>
                              DEPARTMENT 56, INC.
                             (PARENT COMPANY ONLY)
                 SCHEDULE I -- CONDENSED FINANCIAL INFORMATION
                                 BALANCE SHEETS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                                         JANUARY 3,  DECEMBER 28,
                                                                                            1998         1996
                                                                                         ----------  ------------
 
<S>                                                                                      <C>         <C>
                                                     ASSETS
 
INVESTMENT IN SUBSIDIARIES.............................................................  $  184,420   $  195,349
RECEIVABLE FROM SUBSIDIARIES...........................................................       2,510        1,543
                                                                                         ----------  ------------
                                                                                         $  186,930   $  196,982
                                                                                         ----------  ------------
                                                                                         ----------  ------------
 
                                      LIABILITIES AND STOCKHOLDERS' EQUITY
 
CURRENT LIABILITIES--
  Accrued expenses.....................................................................  $      275   $      225
 
STOCKHOLDERS' EQUITY:
  Preferred stock, $.01 par value; authorized 20,000 shares; no shares issued..........      --           --
  Common Stock, $.01 par value; authorized 100,000 shares; issued 21,765 and 21,584
    shares, respectively...............................................................         218          216
  Additional paid-in capital...........................................................      44,645       42,315
  Treasury stock, at cost; 2,199 and 0 shares, respectively............................     (55,215)      --
  Retained earnings....................................................................     197,007      154,226
                                                                                         ----------  ------------
    Total stockholders' equity.........................................................     186,655      196,757
                                                                                         ----------  ------------
                                                                                         $  186,930   $  196,982
                                                                                         ----------  ------------
                                                                                         ----------  ------------
</TABLE>
 
------------------------
 
Note:  Investment in subsidiary is accounted for under the equity method of
accounting.
 
         See notes to consolidated financial statements included in the
                 1997 Annual Report, incorporated by reference.
 
                                       13
<PAGE>
                              DEPARTMENT 56, INC.
                             (PARENT COMPANY ONLY)
 
           SCHEDULE I -- CONDENSED FINANCIAL INFORMATION (CONTINUED)
                              STATEMENTS OF INCOME
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                           YEAR ENDED    YEAR ENDED    YEAR ENDED
                                                                           JANUARY 3,   DECEMBER 28,  DECEMBER 30,
                                                                              1998          1996          1995
                                                                           -----------  ------------  ------------
<S>                                                                        <C>          <C>           <C>
Equity in earnings of subsidiaries.......................................   $  43,216    $   46,263    $   49,435
Interest expense.........................................................      --            --              (955)
General and administrative expenses......................................        (435)         (319)         (227)
                                                                           -----------  ------------  ------------
Net income...............................................................   $  42,781    $   45,944    $   48,253
                                                                           -----------  ------------  ------------
                                                                           -----------  ------------  ------------
</TABLE>
 
         See notes to consolidated financial statements included in the
                 1997 Annual Report, incorporated by reference.
 
                                       14
<PAGE>
                              DEPARTMENT 56, INC.
                             (PARENT COMPANY ONLY)
 
           SCHEDULE I -- CONDENSED FINANCIAL INFORMATION (CONTINUED)
                            STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                           YEAR ENDED    YEAR ENDED    YEAR ENDED
                                                                           JANUARY 3,   DECEMBER 28,  DECEMBER 30,
                                                                              1998          1996          1995
                                                                           -----------  ------------  ------------
<S>                                                                        <C>          <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income.............................................................   $  42,781    $   45,944    $   48,253
  Adjustments to reconcile net income to net cash provided by (used in)
    operating activities:
    Dividends received from subsidiaries.................................      55,094        --           109,596
    Equity in earnings of subsidiaries...................................     (43,216)      (46,263)      (49,435)
    Decrease in accrued interest payable.................................      --            --              (644)
    (Increase) decrease in receivable from subsidiaries..................        (967)           28           (51)
    Increase (decrease) in accrued expenses..............................          50           (45)         (584)
                                                                           -----------  ------------  ------------
      Net cash provided by (used in) operating activities................      53,742          (336)      107,135
                                                                           -----------  ------------  ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from the exercise of common stock options.....................       1,473           336           865
  Principal payments on long-term debt...................................      --            --          (108,000)
  Purchases of treasury stock............................................     (55,215)       --            --
                                                                           -----------  ------------  ------------
      Net cash provided by (used in) financing activities................     (53,742)          336      (107,135)
                                                                           -----------  ------------  ------------
 
NET CHANGE IN CASH AND CASH EQUIVALENTS..................................      --            --            --
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD.........................      --            --            --
                                                                           -----------  ------------  ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD...............................   $  --        $   --        $   --
                                                                           -----------  ------------  ------------
                                                                           -----------  ------------  ------------
</TABLE>
 
         See notes to consolidated financial statements included in the
                 1997 Annual Report, incorporated by reference.
 
                                       15
<PAGE>
                              DEPARTMENT 56, INC.
                SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                   COLUMN B      COLUMN C
                                                                  -----------  -------------                  COLUMN E
                            COLUMN A                                BALANCE    (1)CHARGED TO    COLUMN D     -----------
----------------------------------------------------------------   BEGINNING     COSTS AND    -------------  BALANCE END
DESCRIPTION                                                        OF PERIOD     EXPENSES      DEDUCTIONS     OF PERIOD
----------------------------------------------------------------  -----------  -------------  -------------  -----------
<S>                                                               <C>          <C>            <C>            <C>
Year ended January 3, 1998:
  Allowance for doubtful accounts...............................   $   5,014     $   1,087    $      941(a)   $   5,160
  Allowance for obsolete and overstock inventory................       2,942         3,447         2,004          4,385
  Allowance for sales returns and credits.......................       5,249         8,752         6,104          7,897
                                                                  -----------  -------------  -------------  -----------
                                                                   $  13,205     $  13,286    $    9,049      $  17,442
                                                                  -----------  -------------  -------------  -----------
                                                                  -----------  -------------  -------------  -----------
Year ended December 28, 1996:
  Allowance for doubtful accounts...............................   $   4,329     $   2,014    $    1,329(a)   $   5,014
  Allowance for obsolete and overstock inventory................       3,604           867         1,529          2,942
  Allowance for sales returns and credits.......................       2,555        11,585         8,891          5,249
                                                                  -----------  -------------  -------------  -----------
                                                                      10,488     $  14,466    $   11,749      $  13,205
                                                                  -----------  -------------  -------------  -----------
                                                                  -----------  -------------  -------------  -----------
Year ended December 30, 1995:
  Allowance for doubtful accounts...............................   $   3,592     $   2,293    $    1,556(a)   $   4,329
  Allowance for obsolete and overstock inventory................       2,660         1,866           922          3,604
  Allowance for sales returns and credits.......................       1,641         6,529         5,615          2,555
                                                                  -----------  -------------  -------------  -----------
                                                                   $   7,893     $  10,688    $    8,093      $  10,488
                                                                  -----------  -------------  -------------  -----------
                                                                  -----------  -------------  -------------  -----------
</TABLE>
 
------------------------
 
(a)  Accounts determined to be uncollectible and charged against allowance
     account, net of collections on accounts previously charged against
     allowance account.
 
                                       16
<PAGE>
                                   SIGNATURES
 
    Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
 
                                          Department 56, Inc.
 
                                By:              /s/ SUSAN E. ENGEL
                                     -----------------------------------------
                                                   Susan E. Engel
                                              CHAIRWOMAN OF THE BOARD
Date: April 2, 1998                         AND CHIEF EXECUTIVE OFFICER
 
    Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
 
<TABLE>
<CAPTION>
                        SIGNATURE                                 CAPACITY IN WHICH SIGNED              DATE
----------------------------------------------------------  -------------------------------------  ---------------
<C>                                                         <S>                                    <C>
                    /s/ SUSAN E. ENGEL                      Chairwoman of the Board, Chief          April 2, 1998
      ----------------------------------------------        Executive Officer and Director
                      Susan E. Engel                        (Principal Executive Officer)
 
                   /s/ MARK R. KENNEDY                      Chief Financial Officer and             April 2, 1998
      ----------------------------------------------        Senior Vice President
                     Mark R. Kennedy                        (Principal Financial Officer)
 
                  /s/ TIMOTHY J. SCHUGEL                    Vice President -- Finance and           April 2, 1998
      ----------------------------------------------        Principal Accounting Officer
                    Timothy J. Schugel                      (Principal Accounting Officer)
 
                   /s/ TODD L. BACHMAN                                                              April 2, 1998
      ----------------------------------------------        Director
                     Todd L. Bachman
 
                     /s/ MAXINE CLARK                                                               April 2, 1998
      ----------------------------------------------        Director
                       Maxine Clark
 
                  /s/ SANDRA J. HORBACH                                                             April 2, 1998
      ----------------------------------------------        Director
                    Sandra J. Horbach
 
                   /s/ WM. BRIAN LITTLE                                                             April 2, 1998
      ----------------------------------------------        Director
                     Wm. Brian Little
 
                   /s/ GARY S. MATTHEWS                                                             April 2, 1998
      ----------------------------------------------        Director
                     Gary S. Matthews
 
                 /s/ STEVEN G. ROTHMEIER                                                            April 2, 1998
      ----------------------------------------------        Director
                   Steven G. Rothmeier
 
                      /s/ VIN WEBER                                                                 April 2, 1998
      ----------------------------------------------        Director
                        Vin Weber
</TABLE>
 
                                       17
<PAGE>
                              DEPARTMENT 56, INC.
                               INDEX TO EXHIBITS
 
<TABLE>
<CAPTION>
 EXHIBIT                                                  DESCRIPTION
---------  ---------------------------------------------------------------------------------------------------------
<C>        <S>
     3.1   Restated Certificate of Incorporation of the Company. (Incorporated herein by reference to Exhibit 3.1 of
           Registrant's Quarterly Report on Form 10-Q for the quarter ended July 3, 1993. SEC File no. 1-11908)
     3.2   Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock of
           the Company. (Incorporated herein by reference to Exhibit 1.1 of Registrant's Amendment No. 1, dated May
           12, 1997, to Registration Statement on Form 8-A, dated April 23, 1997. SEC File no. 1-11908)
     3.3   Restated By-Laws of the Company. (Incorporated herein by reference to Exhibit 3.2 of Registrant's
           Registration Statement on Form S-1, No. 33-61514 and to Exhibits 1 and 2 of Registrant's Current Report
           on Form 8-K dated February 15, 1996. SEC File no. 1-11908)
     4.1   Specimen form of Company's Common Stock certificate. (Incorporated herein by reference to Exhibit 4.1 of
           Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1994. SEC File no.
           1-11908)
     4.2   Rights Agreement (including Exhibits A, B and C thereto), dated as of April 23, 1997, between the Company
           and ChaseMellon Shareholder Services, L.L.C., as Rights Agent. (Incorporated herein by reference to
           Exhibit 1 of Registrant's Registration Statement on Form 8-A, dated April 23, 1997. SEC File no. 1-11908)
     4.3   First Amendment, dated as of March 13, 1998, to Rights Agreement between the Company and ChaseMellon
           Shareholder Services, L.L.C., as Rights Agent. (Incorporated herein by reference to Exhibit 1 to
           Registrant's Amendment No. 2, dated March 16, 1998, to Registration Statement on Form 8-A, dated April
           23, 1997. SEC File no. 1-11908)
    10.1   Department 56, Inc. 1992 Stock Option Plan. (Incorporated herein by reference to Exhibit 10.1 of
           Registrant's Registration Statement on Form S-1, No. 33-61514.)+
    10.2   Form of Stock Option Agreement in connection with the 1992 Stock Option Plan. (Incorporated herein by
           reference to Exhibit 10.2 of Registrant's Registration Statement on Form S-1, No. 33-61514.)+
    10.3   Form of Outside Directors Stock Option Agreement.+*
    10.4   Lease, dated April 1, 1989, as amended, between Hoyt Properties, Inc. and the Company for the Eden
           Prairie warehouse. (Incorporated herein by reference to Exhibit 10.7 of Registrant's Registration
           Statement on Form S-1, No. 33-61514.)
    10.5   Lease, dated December 8, 1993 as amended August 25, 1994, between Grantor Retained Income Trust of Robert
           L. Johnson and the Company for the Bloomington warehouse. (Incorporated herein by reference to Exhibit
           10.5 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1994. SEC File no.
           1-11908)
    10.6   Amended and Restated Credit Agreement, dated as of February 17, 1995, among D 56, Inc., the Banks parties
           thereto, and Chemical Bank as agent, issuing bank and accepting bank. (Incorporated herein by reference
           to Exhibit 10.1 of Registrant's Current Report on Form 8-K dated February 17, 1995. SEC File no. 1-11908)
    10.7   First Amendment, dated as of November 25, 1996, to Amended and Restated Credit Agreement among D 56,
           Inc., the Banks parties thereto, and The Chase Manhattan Bank (as successor to Chemical Bank), as agent
           for the Banks.*
    10.8   Second Amendment, dated as of September 30, 1997, to Amended and Restated Credit Agreement among D 56,
           Inc., the Banks parties thereto, and The Chase Manhattan Bank (as successor to Chemical Bank), as agent
           for the Banks.*
    10.9   Third Amendment, dated as of December 16, 1997, to Amended and Restated Credit Agreement among D 56,
           Inc., the Banks parties thereto, and The Chase Manhattan Bank (as successor to Chemical Bank), as agent
           for the Banks.*
</TABLE>
 
                                       18
<PAGE>
<TABLE>
<CAPTION>
 EXHIBIT                                                  DESCRIPTION
---------  ---------------------------------------------------------------------------------------------------------
    10.10  Pledge Agreement, dated as of February 17, 1995, by the Company in favor of Chemical Bank. (Incorporated
           herein by reference to Exhibit 10.2 of Registrant's Current Report on Form 8-K dated February 17, 1995.
           SEC File no. 1-11908)
<C>        <S>
    10.11  Amendment, dated as of December 30, 1997, to Pledge Agreement by the Company in favor of The Chase
           Manhattan Bank (as successor to Chemical Bank).*
    10.12  Guarantee, dated as of February 17, 1995, by the Company in favor of Chemical Bank. (Incorporated herein
           by reference to Exhibit 10.3 of Registrant's Current Report on Form 8-K dated February 17, 1995. SEC File
           no. 1-11908)
    10.13  Pledge Agreement, dated as of February 17, 1995, by D 56, Inc. in favor of Chemical Bank. (Incorporated
           herein by reference to Exhibit 10.8 of Registrant's Current Report on Form 8-K dated February 17, 1995.
           SEC File no. 1-11908)
    10.14  Pledge Agreement, dated as of February 17, 1995, by FL 56 Intermediate Corp. in favor of Chemical Bank.
           (Incorporated herein by reference to Exhibit 10.4 of Registrant's Current Report on Form 8-K dated
           February 17, 1995. SEC File no. 1-11908)
    10.15  Guarantee, dated as of February 17, 1995, by FL 56 Intermediate Corp. in favor of Chemical Bank.
           (Incorporated herein by reference to Exhibit 10.5 of Registrant's Current Report on Form 8-K dated
           February 17, 1995. SEC File no. 1-11908)
    10.16  Pledge Agreement, dated as of February 17, 1995, by ed bazinet international, inc. in favor of Chemical
           Bank. (Incorporated herein by reference to Exhibit 10.6 of Registrant's Current Report on Form 8-K dated
           February 17, 1995. SEC File no. 1-11908)
    10.17  Guarantee, dated as of February 17, 1995, by ed bazinet international, inc. in favor of Chemical Bank.
           (Incorporated herein by reference to Exhibit 10.7 of Registrant's Current Report on Form 8-K dated
           February 17, 1995. SEC File no. 1-11908)
    10.18  Guarantee, dated as of February 17, 1995, by Department 56 Trading Co., Ltd. in favor of Chemical Bank.
           (Incorporated herein by reference to Exhibit 10.9 of Registrant's Current Report on Form 8-K dated
           February 17, 1995. SEC File no. 1-11908)
    10.19  Subsidiaries Guarantee, dated as of December 30, 1997, by Department 56 Retail, Inc. and Department 56
           Sales, Inc. in favor of The Chase Manhattan Bank.*
    10.20  Form of Indemnification Agreement between the Company and its directors and executive officers.
           (Incorporated herein by reference to Exhibit 10.24 of Registrant's Registration Statement on Form S-1,
           No. 33-61514.)
    10.21  Department 56, Inc. 1993 Stock Incentive Plan. (Incorporated herein by reference to Exhibit 10.25 of
           Registrant's Registration Statement on Form S-1, No. 33-61514.)+
    10.22  Department 56, Inc. 1995 Stock Incentive Plan. (Incorporated herein by reference to Exhibit 10.18 of
           Registrant's Annual Report on Form 10-K for the fiscal year ended December 30, 1995. SEC File no.
           1-11908)+
    10.23  Department 56, Inc. 1997 Stock Incentive Plan. (Incorporated herein by reference to Exhibit 4.4 of
           Registrant's Registration Statement on Form S-8, No. 333-41639.)+
    10.24  Form of Stock Option Agreement in connection with Department 56, Inc. 1993 Stock Incentive Plan,
           Department 56, Inc. 1995 Stock Incentive Plan, and Department 56, Inc. 1997 Stock Incentive Plan.
           (Incorporated herein by reference to Exhibit 10.1 of Registrant's Quarterly Report on Form 10-Q for the
           quarter ended July 3, 1993. SEC File no. 1-11908)+
    10.25  Department 56, Inc. Annual Cash Incentive Program +*
    11.1   Computation of Earnings Per Share.*
    13.1   Excerpts from Annual Report to Stockholders for fiscal year ended January 3, 1998.*
</TABLE>
 
                                       19
<PAGE>
<TABLE>
<CAPTION>
 EXHIBIT                                                  DESCRIPTION
---------  ---------------------------------------------------------------------------------------------------------
    21.1   Subsidiaries of the Company.*
<C>        <S>
    23.1   Independent Auditors' Consent*
    27.1   Financial Data Schedule (accompanies EDGAR electronic format only)*
</TABLE>
 
------------------------
 
+ Management contract or compensatory plan
 
* Filed herewith
 
                                       20