Mail Stop 0308
June 20, 2005
Ms. Paula E. Manley
Chief Financial Officer
Enesco Group, Inc.
225 Windsor Drive
Itasca, Illinois 60143
Re: Enesco Group, Inc.
Form 10-K for the Year Ended December 31, 2004
Form 10-Q for the Quarter Ended March 31, 2005
File No. 0-1349
Dear Ms. Manley:
We have reviewed your response dated June 14, 2005 to our
comment letter dated March 11, 2005 and have the following
additional
comments. Where indicated, we think you should revise your
documents
in response to these comments. If you disagree, we will consider
your explanation as to why our comment is inapplicable or a
revision
is unnecessary. Please be as detailed as necessary in your
explanation. In some of our comments, we may ask you to provide
us
with information so we may better understand your disclosure.
After
reviewing this information, we may raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Form 10-K for the Year Ended December 31, 2004
General
1. We note the information provided to us in your responses to
comments 2, 4, 8, 13, 17, 19, 21, 22 and 25 in our letter dated
May
11, 2005. Please confirm to us that you intend to include
disclosures in your future annual and interim filings, as
applicable,
to reflect the type of information provided to us to the extent
then
applicable.
Item 7. Management`s Discussion and Analysis of Financial
Position
and Results of Operations, page 17
Critical Accounting Policies, page 18
2. We note your response to comment 5 in our letter dated May 11,
2005. Please confirm to us that you intend to include disclosures
in
your future annual and interim filings, as applicable:
* to quantify and discuss the effect of critical accounting
estimates
on your results of operations for the years presented;
* to discuss whether changes in your estimates of future operating
results and related cash flows are reasonably likely to occur and
result in an impairment of your long-lived assets and goodwill;
and
* to reflect the type of information provided to us in your
response
to the extent then applicable.
3. We note your response to comment 7 in our letter dated May 11,
2005. Reserves as to which the additions, deductions and balances
are not individually significant may be grouped in one total and
in
such case the information required by columns C and D of the
schedule
need not be given. See Rule 12-09 of Regulation S-X. In future
filings please revise to group and separately disclose other
contra-
accounts receivable reserves.
Liquidity and Capital Resources, page 24
4. We note your response to comment 11 in our letter dated May 11,
2005. It appears that changes in components of working capital
discussed in your proposed analysis of financial position vary
significantly from amounts reflected in your statements of cash
flow.
In future filings, please clarify your discussion and analysis of
changes in financial position so that a reader is able to
reconcile
to the related cash flow amounts.
5. We note your response to comment 12 in our letter dated May 11,
2005. In future filings, please also disclose minimum royalty
commitments in your table of contractual obligations. In
addition,
please confirm to us that you intend to include disclosures in
your
future annual and interim filings, as applicable, to reflect the
type
of information provided to us to the extent then applicable.
Notes to Consolidated Financial Statements, page 34
Note 1. Summary of Significant Accounting Policies, page 34
6. Reference is made to your response to comment 19 in our letter
dated May 11, 2005. You state revenue is recognized when the club
kit is shipped and that the membership fee is paid in exchange for
products delivered representing the culmination of a separate
earnings process. Tell us if the membership fee is refundable or
nonrefundable. As previously requested, please advise us of what
ongoing services you provide to members subsequent to the sale of
the
club kit. In this regard, in addition to the physical items
included
in the kit, it appears that members are also entitled to a
quarterly
newsletter, access to an exclusive club web site and toll free
hotline as well as special surprises throughout the year. Tell us
why the membership fee does not include services delivered over
the
membership period. Further, please explain why your method of
recognizing the entire membership fee when the kit is shipped is
more
reasonable than recording the fee straight-line over the
membership
term. See SAB Topic 13.A.
Form 10-Q for the Quarter Ended March 31, 2005
Item1. Financial Statements, page 6
7. We note that you continued to report an operating and cash flow
loss during the quarter ended March 31, 2005. Please tell us the
results of your test of the recoverability of long-lived assets at
the end of the quarter. In doing so, tell us whether you have
revised your estimates of future operating results and cash flows
used to test the recoverability of long-lived assets and the
extent
to which estimated undiscounted cash flows exceed the carrying
values
of your long-lived assets.
Notes to Consolidated Financial Statements (Unaudited), page 11
Note 2. Summary of Significant Accounting Policies, page 12
Basis of Presentation, page 12
Inventory Reserves, page 14
8. It appears that your method of establishing inventory reserves
to
state inventory at the lower of cost or market may result in the
recognition of gains on inventory previously written-down to
market
to the extent that goods identified as excess inventory in one
period
is not identified as excess inventory in a future period. Please
refer to footnote 2 of Statement 3 in Chapter 4 of ARB 43. Please
advise.
Item 2. Management`s Discussion and Analysis of Financial
Position
and Results of Operations, page 21
Liquidity and Capital Resources, page 27
9. We note your disclosure that you are not aware of any trends,
events, demands, commitments or uncertainties that reasonably can
be
expected to have a material adverse effect on liquidity and the
ability to meet anticipated requirements for working capital and
capital expenditures. We also note that you have reported
operating
losses for four of the past five quarters and cash flow losses
since
2003 and that your license agreement with Precious Moments will
terminate on July 1, 2005. In future filings please discuss the
recent trend of operating and cash flow losses, the uncertainties
regarding future operating and cash flow results and the potential
impact thereof on your business, your ability to comply with debt
covenants and your ability to close the additional financing under
the global senior revolving credit facility commitment or tell us
why
a discussion of these matters is not necessary.
As appropriate, please amend your filings and respond to
these comments within 10 business days or tell us when you will
provide us with a response. Please furnish a response letter that
keys your responses to our comments and provides any requested
information. Detailed response letters greatly facilitate our
review. Please file your response on EDGAR as a correspondence
file.
Please understand that we may have additional comments after
reviewing your amendments and responses to our comments.
You may contact Bill Thompson, Staff Accountant, at (202)
551-
3344 or Donna Di Silvio, Staff Accountant, at (202) 551-3202, or
in
their absence, to the undersigned at (202) 551-3841 if you have
any
questions regarding these comments.
Sincerely,
Michael Moran
Accounting Branch Chief
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Ms. Paula E. Manley
Enesco Group, Inc.
June 20, 2005
Page 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-0405
DIVISION OF
CORPORATION FINANCE