Enesco Group, Inc. (NYSE:ENC), a leader in the gift, collectibles
and home and garden decor industries, today announced financial
results for the first quarter ended March 31, 2005. First Quarter
2005 Summary -- Revenue of $60.1 million, 14.8% higher than 1Q '04
-- Gross profit of $22.6 million, a slight increase from 1Q '04 --
Net loss increased to $15.2 million, primarily due to reduced gross
margin and higher SG&A, interest and tax expense Financial
Results Revenue for the quarter increased 14.8% to $60.1 million
from $52.3 million in the comparable period of 2004. The revenue
increase is primarily due to strength in the Heartwood Creek
product line and contributions from Gregg Gift and Dartington
Crystal, which were acquired in February and July 2004,
respectively. Revenue for the quarter also includes a $1.2 million
favorable impact from changes in foreign currency translation
rates. Gross profit was $22.6 million compared to $22.3 million in
the first quarter of 2004. Gross profit from higher sales during
the first quarter of 2005 was offset by an increase in the Precious
Moments royalty, an increase in closeout sales and a decrease in
Club kit sales. Selling, general and administrative (SG&A)
expenses were $34.6 million versus $29.5 million in the same period
last year. The increase primarily reflects a $2.4 million
accelerated depreciation on the Enterprise Resource Planning (ERP)
system and an increase in SG&A expenses related to the Gregg
Gift and Dartington Crystal acquisitions from 2004, as well as
Sarbanes-Oxley compliance. The operating loss for the first quarter
was $12.0 million compared to an operating loss of $7.2 million in
the year ago period. First quarter net loss was $15.2 million, or
($1.04) per diluted share, versus $4.4 million, or ($0.31) per
diluted share, during the first quarter of 2004. The increase in
net loss was due to the increased operating loss, and higher
interest and tax expenses. Commenting on first quarter results,
Cynthia Passmore-McLaughlin, President and CEO, stated, "While we
continue to face challenges to our business, we are pleased with
the 15% top line growth we experienced during the quarter. We took
a proactive approach to clearing slow moving inventory and have
improved our inventory position. Despite the SG&A increase,
which was due largely to accelerated depreciation from the ERP
system, we continue to focus on improving our operating
efficiencies. While the ERP system caused a backlog of $26 million
at the end of 2004, I'm pleased to report we were able to return to
normal levels by the end of the first quarter of 2005. "In
addition," added Passmore-McLaughlin, "our Heartwood Creek and
Dartington Crystal lines are performing very well and reflect our
strength as a global market leader in gifts and home and garden
decor. As we move ahead, we look forward to making further progress
toward our goal of generating long-term growth and improved
profitability." A conference call will be broadcast live on
Tuesday, May 10, at 1:00 p.m. Central Time (2:00 p.m. Eastern) at
http://www.enesco.com and http://www.streetevents.com. An online
replay also will be available approximately one hour after the
call. To listen to the Webcast, your computer must have RealPlayer
installed. If you do not have RealPlayer, go to
http://www.streetevents.com prior to the call, to download
RealPlayer for free. For a phone replay, call 1-800-642-1687,
Passcode: 6151501. The replay will be available for one week
following the conference call. About Enesco Group, Inc. Enesco
Group, Inc. is a world leader in the gift, collectible, 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 boutique as well as
mass-market chains and direct mail retailers. Internationally,
Enesco serves markets operating in Europe, Canada, Australia,
Mexico, Asia and the Pacific Rim. With subsidiaries located in
Europe and Canada, and a business unit in Hong Kong, 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 Walt Disney Classics Collection,
Nickelodeon, Heartwood Creek, Halycon Days, Lilliput Lane, Border
Fine Arts and Precious Moments, among others. Further information
is available on the Company's web site at www.enesco.com. This
press release contains various forward-looking statements that are
based on management's current assumptions and beliefs and upon
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 licenses for
Precious Moments, Cherished Teddies, Heartwood Creek and Disney;
the Company's ability to grow revenues in mass and niche market
channels; the Company's ability to effectively complete the
implementation of the ERP 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;
changes in the regulations and procedures affecting the importation
of goods into the United States; 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, or acts of war. In
addition, the Company operates in a continually 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. 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. -0- *T ENESCO GROUP, INC. CONSOLIDATED STATEMENTS
OF OPERATIONS UNAUDITED First Quarter Ended March 31, 2005 and 2004
(In thousands, except per share amounts) 2005 2004 % Change
--------- --------- ---------- Net revenues $60,084 $52,323 15%
Cost of sales 37,481 30,014 25% --------- --------- Gross profit
22,603 22,309 1% Gross Profit % 37.6% 42.6% Selling, distribution,
general and administrative expense 34,626 29,531 17% ---------
--------- Operating loss (12,023) (7,222) -66% Interest expense
(399) (85) Interest income 120 112 Other income (expense), net
(835) (315) --------- --------- Loss before income taxes (13,137)
(7,510) -75% Income tax benefit (expense) (2,079) 3,108 ---------
--------- Net loss $(15,216) $(4,402) -246% ========= =========
Loss per share basic and diluted: Net loss ($1.04) ($0.31) Average
basic and diluted shares outstanding 14,607 14,178 ENESCO GROUP,
INC. CONSOLIDATED BALANCE SHEETS (In thousands) ASSETS March 31,
December 31, 2005 2004 ------------ ------------ Current Assets:
Cash and equivalents $18,636 $14,646 Accounts receivable, net
64,389 70,526 Inventories 62,633 65,371 Prepaid Expenses 4,934
3,310 Deferred income taxes 820 920 ------------------------- Total
current assets 151,412 154,773 Property, plant and equipment, net
19,334 22,509 Other assets 16,486 16,601 -------------------------
Total assets $187,232 $193,883 =========================
LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Notes and
loans payable $38,048 $26,354 Accounts payable 14,395 18,680
Federal, state and foreign income taxes 8,078 6,405 Deferred gain
on sale of fixed assets 1,711 1,711 Accrued Expenses - 21,576
21,628 ------------------------- Total current liabilities 83,808
74,778 Long-term liabilities: 9,234 9,838 Total shareholders'
equity 94,190 109,267 ------------------------- Total liabilities
and shareholders' equity $187,232 $193,883
========================= ENESCO GROUP, INC. CONSOLIDATED CONDENSED
STATEMENTS OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 2005 AND 2004
(Unaudited) (In thousands) 2005 2004 ------------ ------------
Operating Activities: Net Loss $(15,216) $(4,402) Adjustments to
reconcile net loss to net cash used by operating activities 7,281
(7,003) ------------ ------------ Net cash used by operating
activities (7,935) (11,405) ------------ ------------ Investing
Activities: Acquisition, net of cash acquired -- (7,262) Purchase
of property, plant and equipment (618) (868) Proceeds from sales of
property, plant and equipment 5 12 ------------ ------------ Net
cash used by investing activities (613) (8,118) ------------
------------ Financing Activities: Issuance of notes and loans
payable 11,761 18,523 Common stock issuance and exercise of stock
options 717 306 ------------ ------------ Net cash provided by
financing activities 12,478 18,829 ------------ ------------ Effect
of exchange rate changes on cash and cash equivalents 60 620
------------ ------------ Increase/(decrease) in cash and cash
equivalents 3,990 (74) Cash and cash equivalents, beginning of
period 14,646 10,645 ------------ ------------ Cash and cash
equivalents, end of period $18,636 $10,571 ============
============ *T
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