Enesco Group, Inc. Reports Third 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 third quarter ended September September: see month. 30, 2005. Net revenues for the quarter decreased 7.1% to $79.2 million from $85.3 million in the comparable period of 2004. The decrease in net revenues reflects the continued decline in sales of collectibles in the U.S., primarily sales related to Precious Moments, as well as the stricter application of credit policies which resulted in placing more orders on hold during the quarter compared to the third quarter of 2004. Net revenues for the third quarter, excluding Precious Moments sales and fees, were down only 3.8% from the same period of 2004. Gross profit was $32.4 million compared to $34.7 million in the third quarter of 2004, primarily reflecting reduced net revenue. Gross profit was 40.9% compared to 40.7% in the third quarter of 2004. Gross margin was impacted positively by the favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. product mix in the U.S., U.K. and Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of , which more than offset the lower margin percent achieved on the Precious Moments sales and fees. Gross margin excluding Precious Moments revenues and costs increased to 43.3% for the quarter compared to 41.6% for the same period in 2004, reflecting an improvement in the gross margin for core Enesco products. Selling, general and administrative (SG&A) expenses decreased to $31.4 million compared to $33.1 million in the same period last year, despite increased bank and consulting fees and higher bad debt expense. The decrease in SG&A primarily reflects reduced salary expense, as well as lower selling and marketing costs. Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. for the third quarter was $984,000 compared to $1.7 million in the year-ago period. Third quarter net loss was $2.1 million, or ($0.14) 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, compared to net income of $1.0 million, or $0.07 per diluted share, in the third quarter of 2004. The net loss was due to higher interest and income tax expenses. Commenting on the third quarter results, Cynthia Cynthia goddess of the moon. [Gk. Myth.: Kravitz, 72] See : Moon 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, "Throughout this year, we have focused on stabilizing stabilizing, v to hold a limb motionless in order to ground its energy; a standard isometric resistance technique, it releases tension and lengthens muscle fibers. our business, and we are pleased to see initial benefits from our efforts in the third quarter. Net revenues, excluding Precious Moments, are down slightly for the quarter and are even for the first nine months of the year compared to the same periods in 2004. Excluding Precious Moments, we achieved improved gross margin of 43.3%, which reflects healthier product mix and better freight cost recovery. This gross margin is at a level we have not achieved since the second quarter of 2004. We also are pleased to have continued to successfully reduce certain expenses, which contributed to our lower SG&A for the quarter. In addition, our results for the quarter and nine months ended September 30, 2005 also reflect our cash management initiatives. "In late September, we announced a comprehensive operational improvement plan that focuses on rationalizing our product portfolio, reducing costs, right-sizing our organizational structure  This article has no lead section.To comply with Wikipedia's lead section guidelines, one should be written. to the scale of Enesco's current business, and improving our warehousing and distribution models. We remain on track with these initiatives for the fourth quarter and next year and continue to expect to achieve total annual cost savings in the range of $34 million to $38 million in the U.S. and an operating profit margin Operating profit margin The ratio of operating profit to net sales. in the range of 3% to 5% in 2007." More detailed information is set forth in Enesco's Form 10-Q Form 10-Q See 10-Q. for the quarter ended September 30, 2005, which was filed on November November: see month. 9, 2005. Conference Call A conference call will be broadcast live on Thursday Thursday: see week. , November 10, at 8:00 a.m. CST CST abbr. 1. Central Standard Time 2. convulsive shock treatment CST Central Standard Time Noun 1. (9:00 a.m. EST EST electroshock therapy. EST abbr. electroshock therapy ). Investors interested in participating on the live call can do so by calling 1-888-271-7222, and ask for the Enesco Third 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 onto http://www.streetevents.com. To listen to the Webcast, your computer must have RealPlayer A multimedia player from RealNetworks that plays RealAudio and RealVideo transmissions. Included is the technology (see RealJukebox) for organizing music files and creating MP3 files from audio CDs. 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: 2353524. 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 30,000 customers globally, Enesco distributes products to a wide variety of specialty card and gift retailers, home decor boutiques, as well as mass-market mass-mar·ket adj. Of, relating to, or produced for consumption in large numbers, especially when sold in supermarkets, in drugstores, and at newstands: a mass-market paperback. tr.v. chains and direct mail retailers. Internationally, Enesco serves markets operating in the United Kingdom, Canada, Europe, Mexico, Australia 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, 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, Jim Shore Designs, Foundations, Circle of Love, 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 implementing its comprehensive plan for operating improvement and achieving its goals for cost savings and market share increases; 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 Heartwood Creek, Disney and Cherished Teddies 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; 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
Three Months Ended September 30, 2005 and 2004
(In thousands, except per share amounts)
2005 2004 % Change
---------- ---------- ----------
Net revenues $79,221 $85,291 -7%
Cost of sales 46,824 50,578 -7%
---------- ----------
Gross profit 32,397 34,713 -7%
Gross profit % 40.9% 40.7%
Selling, general and administrative
expenses 31,413 33,056 -5%
---------- ----------
Operating income 984 1,657 -41%
Interest expense (661) (350) 89%
Interest income 15 90 -83%
Other expense, net (82) (201) -59%
---------- ----------
Income before income taxes 256 1,196 -79%
Income tax expense (2,371) (157) 1410%
---------- ----------
Net income (loss) $(2,115) $1,039 -304%
========== ==========
Net income (loss) per common share -
basic and diluted:
Net income (loss) ($0.14) $0.07
Average basic shares outstanding 14,773 14,356
Average diluted shares outstanding 14,773 14,669
ENESCO GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
Nine Months Ended September 30, 2005 and 2004
(In thousands, except per share amounts)
2005 2004 % Change
---------- ---------- ----------
Net revenues $188,464 $199,309 -5%
Cost of sales 114,485 115,058 0%
Cost of sales - loss on license
termination 7,713 - -
---------- ----------
Gross profit 66,266 84,251 -21%
Gross profit % 35.2% 42.3%
Selling, general and administrative
expenses 99,206 92,012 8%
---------- ----------
Operating loss (32,940) (7,761) -324%
Interest expense (1,516) (624) 143%
Interest income 173 345 -50%
Other expense, net (281) (244) 15%
---------- ----------
Loss before income taxes (34,564) (8,284) -317%
Income tax benefit (expense) (4,803) 3,769 -227%
---------- ----------
Net loss $(39,367) $(4,515) -772%
========== ==========
Net loss per common share -
basic and diluted:
Net loss ($2.68) ($0.32)
Average basic and diluted shares
outstanding 14,692 14,250
ENESCO GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS
September 30, December 31,
2005 2004
-------------- --------------
Current Assets:
Cash and cash equivalents $4,093 $14,646
Accounts receivable, net 76,626 70,526
Inventories 54,219 65,371
Prepaid expenses 4,247 3,310
Deferred income taxes 587 920
------------------------------
Total current assets 139,772 154,773
Property, plant and equipment, net 16,506 22,509
Other assets 15,770 16,601
------------------------------
Total assets $172,048 $193,883
==============================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes and loans payable $50,222 $26,354
Accounts payable 21,148 18,680
Income taxes payable 7,450 6,405
Deferred gain on sale of property, plant
and equipment 1,711 1,711
Accrued expenses 15,906 21,628
------------------------------
Total current liabilities 96,437 74,778
Long-term liabilities 7,025 9,838
Total shareholders' equity 68,586 109,267
------------------------------
Total liabilities and shareholders'
equity $172,048 $193,883
==============================
ENESCO GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004
(Unaudited)
(In thousands)
2005 2004
-------------- --------------
Operating Activities:
Net loss $(39,367) $(4,515)
Adjustments to reconcile net loss to net
cash used by operating activities 6,145 (29,181)
-------------- --------------
Net cash used by operating activities (33,222) (33,696)
-------------- --------------
Investing Activities:
Acquisitions, net of cash acquired -- (14,321)
Purchase of property, plant and
equipment (1,974) (3,805)
Proceeds from sales of property, plant
and equipment 766 58
-------------- --------------
Net cash used by investing activities (1,208) (18,068)
-------------- --------------
Financing Activities:
Issuance of notes and loans payable 23,979 50,111
Exercise of stock options 322 1,021
-------------- --------------
Net cash provided by financing
activities 24,301 51,132
-------------- --------------
Effect of exchange rate changes on cash
and cash equivalents (424) 1,003
-------------- --------------
Increase (decrease) in cash and cash
equivalents (10,553) 371
Cash and cash equivalents, beginning of
period 14,646 10,645
-------------- --------------
Cash and cash equivalents, end of period $4,093 $11,016
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