Enesco Group, Inc. (NYSE:ENC), a leader in the giftware, and home
and garden decor industries, today announced financial results for
the third quarter ended September 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 product mix in the U.S., U.K. and Canada, 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 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 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 Passmore-McLaughlin, president and CEO,
stated, "Throughout this year, we have focused on stabilizing 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 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 in the range of 3% to 5% in
2007." More detailed information is set forth in Enesco's Form 10-Q
for the quarter ended September 30, 2005, which was filed on
November 9, 2005. Conference Call A conference call will be
broadcast live on Thursday, November 10, at 8:00 a.m. CST (9:00
a.m. EST). 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," or by logging onto 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
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 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, 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 Creek, Walt Disney Company, Walt Disney Classics
Collection, Pooh & Friends, Jim Shore Designs, Foundations,
Circle of Love, Nickelodeon, Bratz, Halcyon 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, 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 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;
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 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 ============== ============== *T
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