Enesco Group, Inc. Reports Second Quarter 2005 Financial Results.ITASCA I·tas·ca A lake of northwest Minnesota. It was identified in 1832 as the source of the Mississippi River. , Ill. -- Enesco E·nes·co , Georges 1881-1955. Romanian-born violinist and composer whose works include the opera Oedipus (1936) and three symphonies. Noun 1. Group, Inc. (NYSE NYSE See: New York Stock Exchange :ENC ENC Encoded (File Name Extension) ENC Enclosure ENC Mime-Encoded (virus scanners) ENC Eastern North Carolina ENC Eisenhower National Clearinghouse for Mathematics and Science Education ), a leader in the giftware, and home and garden decor industries, today announced financial results for the second quarter ended June June: see month. 30, 2005. Second Quarter 2005 Summary --Revenue decreased to $49.2 million compared to $61.7 million in 2Q 2004 primarily due to the continued sales decline in collectibles and the planned shift to the third quarter for procurement The fancy word for "purchasing." The procurement department within an organization manages all the major purchases. and ship dates for seasonal products. --Gross margin decreased by $16.0 million primarily due to the sales volume decline, the $7.7 million non-cash loss on the Precious Moments license termination, and increased closeout closeout, closure the finalization of a feeding program in a feedlot. The cattle are sold and a balance sheet is struck which includes the costs of feeding and housing or confining them. sales. --SG&A expenses increased by $3.4 million to $32.5 million primarily due to the accelerated depreciation Accelerated Depreciation Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years of the life of an asset. Notes: The straight-line depreciation method spreads the cost evenly over the life of an asset. of the Enterprise Resource Planning See ERP. (application, business) Enterprise Resource Planning - (ERP) Any software system designed to support and automate the business processes of medium and large businesses. (ERP (Enterprise Resource Planning) An integrated information system that serves all departments within an enterprise. Evolving out of the manufacturing industry, ERP implies the use of packaged software rather than proprietary software written by or for one customer. ) system, bank penalty fees associated with our current lender and SG&A expenses of Dartington Crystal Based in Torrington in north Devon, England, Dartington Crystal manufactures crystal glassware using traditional Swedish glass blowing techniques. History The company was founded by the Dartington Hall Trust, a charity which aims to assist the economic regeneration of , acquired in July July: see month. 2004. --Net loss increased by $20.9 million to $22.0 million, $1.50 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, primarily due to reduction in gross margin, higher SG&A expenses, and higher interest and tax expense. Commenting on second quarter results, Cynthia Passmore-McLaughlin, President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. , stated, "Our performance was impacted by the Company's initiatives to fix our operating model Operating Model is a term that is used in many contexts. In essence an operating model describes how an organization operates across both business and technology domains. The Operating Model describes what is important for the organization. and improve cash flow. During the second quarter, we terminated the Precious Moments license agreement, further reducing our dependence on collectibles. We also converted our warehouse management and distribution system to an upgraded version of our legacy I.T. system and stabilized sta·bi·lize v. sta·bi·lized, sta·bi·liz·ing, sta·bi·liz·es v.tr. 1. To make stable or steadfast. 2. the remaining portions of our current ERP system that relate to order management and financials. Lastly, we reduced salary costs and headcount in the U.S. and U.K. Our revenues were lower on a year-over-year basis due to the planned shift primarily to the third quarter of our ordering and shipping of seasonal and Christmas products, and the continued softness of the collectible collectible An asset of limited supply that is sought for a variety of reasons including, it is hoped, an increase in value. Stamps, antiques, coins, and works of art are among the many things usually classified as collectibles. product category. While our top line was impacted this quarter, we expect to improve our cash flow by now handling our seasonal products on a 'make to order' basis and spreading the shipments to retailers and payments to our vendors from June through October." More detailed information is set forth in Enesco's Form 10-Q Form 10-Q See 10-Q. for the quarter ended June 30, 2005, which was filed August 9, 2005. Conference Call A conference call will be broadcast live on Wednesday, August 10, at 8:00 a.m. CT (9:00 a.m. Eastern). Investors interested in participating on the live call can do so by calling 1-877-271-7222, and ask for the Enesco Second Quarter Earnings call. Investors also may listen to the live call via a Webcast at http://www.enesco.com and click on "Investor Relations Investor relations The process by which the corporation communicates with its investors. ," or by logging on to http://www.streetevents.com. To listen to the Webcast, your computer must have RealPlayer installed. This Webcast will be available online for 90 days following the live conference call. If you do not have RealPlayer, go to http://www.streetevents.com prior to the call, to download To receive a file transmitted over a network. In any communications session, "download" means receive, and "upload" means send. The download/upload often implies a big/little scenario, in which data is being downloaded from the "big" server into the "little" user's computer. RealPlayer for free. For a phone replay, call 1-800-642-1687, Passcode: 8593955. The phone replay will be available for one week following the conference call. About Enesco Group, Inc. Enesco Group, Inc. is a world leader in the giftware, and home and garden decor industries. Serving more than 40,000 customers globally, Enesco distributes products to a wide variety of specialty card and gift retailers, home decor boutiques as well as mass-market chains and direct mail retailers. Internationally, Enesco serves markets operating in Europe, Canada, Australia, Mexico, and Asia. With subsidiaries located in Europe and Canada, and a business unit in Hong Kong Hong Kong (hŏng kŏng), Mandarin Xianggang, special administrative region of China, formerly a British crown colony (2005 est. pop. 6,899,000), land area 422 sq mi (1,092 sq km), adjacent to Guangdong prov. , Enesco's international distribution network is a leader in the industry. The Company's product lines include some of the world's most recognizable brands, including Heartwood heartwood, the central, woody core of a tree, no longer serving for the conduction of water and dissolved minerals; heartwood is usually denser and darker in color than the outer sapwood. Creek, Jim Shore, Walt Disney Noun 1. Walt Disney - United States film maker who pioneered animated cartoons and created such characters as Mickey Mouse and Donald Duck; founded Disneyland (1901-1966) Disney, Walter Elias Disney Company, Walt Disney Classics Collection The Walt Disney Classics Collection is a series of collectible sculptures of Disney characters and scenes. , Pooh & Friends, Nickelodeon, Bratz, Halcyon hal·cy·on n. 1. A kingfisher, especially one of the genus Halcyon. 2. A fabled bird, identified with the kingfisher, that was supposed to have had the power to calm the wind and the waves while it nested on the sea Days, Lilliput Lane and Border Fine Arts, among others. Further information is available on the Company's web site at www.enesco.com. This press release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. , which reflect management's current assumptions and beliefs and are based on information currently available to management. The Company has tried to identify such forward-looking statements by use of such words as "expects," "intends," "anticipates," "could," "estimates," "plans," and "believes," and similar expressions, but these words are not the exclusive means of identifying such statements. Such statements are subject to various risks, uncertainties and other factors, which could cause actual results to vary materially from those anticipated, estimated, expected or projected. Important factors that may cause actual future events or results to differ materially and adversely from those described in the forward-looking statements include, but are not limited to: the Company's success in developing new products and consumer reaction to the Company's new products; the Company's ability to secure, maintain and renew popular licenses, particularly our Cherished Teddies, Heartwood Creek and Disney licenses; the Company's ability to grow revenues in mass and niche market A niche market also known as a target market is a focused, targetable portion (subset) of a market sector. By definition, then, a business that focuses on a niche market is addressing a need for a product or service that is not being addressed by mainstream providers. channels; the Company's ability to comply with covenants contained in its credit facility; the Company's ability to obtain a new global senior credit facility; the Company's ability to effectively transition to the legacy information system; changes in general economic conditions, as well as specific market conditions; fluctuations in demand for our products; manufacturing lead times; the timing of orders and shipments and our ability to predict customer demands; inventory levels and purchase commitments exceeding requirements based upon incorrect forecasts; collection of accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying ; changes in the regulations and procedures affecting the importation of goods into the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. ; changes in foreign exchange rates; price and product competition in the giftware industry; variations in sales channels, product costs or mix of products sold; and, possible future terrorist attacks, epidemics This article is a list of major epidemics. Worldwide Pandemics
The mobile Regional Operations Center (ROC) in Turkey investigates a dam blown up by Kurdish terrorists. . In addition, the Company operates in a continually con·tin·u·al adj. 1. Recurring regularly or frequently: the continual need to pay the mortgage. 2. changing business environment and does not intend to update or revise the forward-looking statements contained herein, which speak only as of the date hereof here·of adv. Of this. hereof Adverb Formal or law of or concerning this Adv. 1. hereof - of or concerning this; "the twigs hereof are physic" . Additional information regarding forward-looking statement risk factors is contained in the Company's reports and filings with the Securities and Exchange Commission. In light of these risks and uncertainties, the forward-looking statements contained herein may not occur and actual results could differ materially from those set forth herein. Accordingly, you should not rely on these forward-looking statements as a prediction of actual future results.
ENESCO GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
Second Quarter Ended June 30, 2005 and 2004
(In thousands, except per share amounts)
2005 2004
--------- ---------
Net revenues $49,159 $61,695
Cost of sales 30,180 34,466
Cost of sales - loss on license termination 7,713 -
--------- ---------
Gross profit 11,266 27,229
Gross profit % 22.9% 44.1%
Selling, general and administrative expense 32,511 29,100
--------- ---------
Operating loss (21,245) (1,871)
Interest expense (456) (189)
Interest income 38 143
Other income (expense), net (20) (53)
--------- ---------
Loss before income taxes (21,683) (1,970)
Income tax benefit (expense) (353) 818
--------- ---------
Net loss $(22,036) $(1,152)
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Loss per share basic and diluted:
Net loss ($1.50) ($0.08)
Average basic and diluted shares outstanding 14,700 14,238
ENESCO GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
Six Months Ended June 30, 2005 and 2004
(In thousands, except per share amounts)
2005 2004
---------- ----------
Net revenues $109,243 $114,018
Cost of sales 67,661 64,480
Cost of sales - loss on license termination 7,713 -
---------- ----------
Gross profit 33,869 49,538
Gross profit % 31.0% 43.4%
Selling, general and administrative expense 67,793 58,956
---------- ----------
Operating loss (33,924) (9,418)
Interest expense (855) (274)
Interest income 158 255
Other income (expense), net (199) (43)
---------- ----------
Loss before income taxes (34,820) (9,480)
Income tax benefit (expense) (2,432) 3,926
---------- ----------
Net loss $(37,252) $(5,554)
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Loss per share basic and diluted:
Net loss ($2.54) ($0.39)
Average basic and diluted shares outstanding 14,653 14,204
ENESCO GROUP, INC.
(UNAUDITED) CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS
June 30, December 31,
2005 2004
------------ ------------
Current Assets:
Cash and equivalents $4,571 $14,646
Accounts receivable, net 56,424 70,526
Inventories 57,612 65,371
Prepaid expenses 4,129 3,310
Property held for sale 761 -
Deferred income taxes 686 920
---------------------------
Total current assets 124,183 154,773
Property, plant and equipment, net 16,712 22,509
Other assets 15,805 16,601
---------------------------
Total assets $156,700 $193,883
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes and loans payable $35,062 $26,354
Accounts payable 15,471 18,680
Income taxes payable 7,488 6,405
Deferred gain on sale of fixed assets 1,711 1,711
Accrued Expenses 19,448 21,628
---------------------------
Total current liabilities 79,180 74,778
Long-term liabilities 7,519 9,838
Total shareholders' equity 70,001 109,267
---------------------------
Total liabilities and shareholders' equity $156,700 $193,883
===========================
ENESCO GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2005 AND 2004
(Unaudited)
(In thousands)
2005 2004
--------- ---------
Operating Activities:
Net loss $(37,252) $(5,554)
Adjustments to reconcile net loss to net cash
used by operating activities 19,683 (16,378)
--------- ---------
Net cash used by operating activities (17,569) (21,932)
--------- ---------
Investing Activities:
Purchase of property, plant and equipment (1,204) (2,524)
Acquisition, net of cash acquired -- (7,413)
Proceeds from sales of property, plant and
equipment 6 56
--------- ---------
Net cash used by investing activities (1,198) (9,881)
--------- ---------
Financing Activities:
Issuance of notes and loans payable 8,797 29,950
Exercise of stock options 322 266
--------- ---------
Net cash provided by financing activities 9,119 30,216
--------- ---------
Effect of exchange rate changes on cash and cash
equivalents (427) 97
--------- ---------
Increase/decrease in cash and cash equivalents (10,075) (1,500)
Cash and cash equivalents, beginning of period 14,646 10,645
--------- ---------
Cash and cash equivalents, end of period $4,571 $9,145
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