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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____.
Commission File Number 0-1349
Enesco Group, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Massachusetts 04-1864170
- ------------------------------------ ----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
225 Windsor Drive, Itasca, Illinois 60143
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(Address of principal executive offices) (Zip Code)
630-875-5300
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(Registrant's telephone number, including area code)
N/A
(Former name, address and fiscal year, if changed since last report)
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [x] No [ ]
March 31,
2001 2000
---- ----
Shares Outstanding:
Common Stock with 13,653,809 13,531,755
Associated Rights
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PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ENESCO GROUP, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
MARCH 31, 2001 AND DECEMBER 31, 2000
(UNAUDITED)
(IN THOUSANDS)
MARCH 31, DECEMBER 31,
2001 2000
---- ----
ASSETS
CURRENT ASSETS:
Cash and certificates of deposit $ 2,103 $ 4,006
Accounts receivable, net 56,533 72,923
Inventories 60,655 60,491
Prepaid expenses 3,309 3,640
Current tax assets 11,109 12,095
-------- --------
Total current assets 133,709 153,155
-------- --------
PROPERTY PLANT AND EQUIPMENT:
Property, plant and equipment, at cost 85,831 85,505
Less accumulated depreciation 57,287 56,256
-------- --------
Property, plant and equipment, net 28,544 29,249
-------- --------
OTHER ASSETS:
Goodwill and other intangibles, net 34,879 35,564
Other 948 947
Deferred income taxes 12,389 12,564
-------- --------
Total other assets 48,216 49,075
-------- --------
TOTAL ASSETS $210,469 $231,479
======== ========
The accompanying notes are an integral part of these condensed financial
statements.
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ENESCO GROUP, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
MARCH 31, 2001 AND DECEMBER 31, 2000
(UNAUDITED)
(IN THOUSANDS)
MARCH 31, DECEMBER 31,
2001 2000
---- ----
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes and loans payable $ 12,459 $ 14,000
Accounts payable 13,374 17,867
Federal, state and foreign income taxes 31,789 35,154
Accrued expenses
Payroll and commissions 2,164 3,698
Royalties 4,640 7,747
Postretirement benefits 4,541 4,407
Other 10,622 11,351
--------- ---------
Total current liabilities 79,589 94,224
--------- ---------
LONG-TERM LIABILITIES:
Postretirement benefits 5,569 6,065
Deferred income taxes 4,687 5,497
--------- ---------
Total long-term liabilities 10,256 11,562
--------- ---------
SHAREHOLDERS' EQUITY:
Common stock 3,154 3,154
Capital in excess of par value 48,458 48,711
Retained earnings 334,175 337,615
Accumulated other comprehensive income (6,234) (4,388)
--------- ---------
379,553 385,092
Less - shares held in treasury, at cost (258,929) (259,399)
--------- ---------
Total shareholders' equity 120,624 125,693
--------- ---------
TOTAL LIABILITIES AND EQUITY $ 210,469 $ 231,479
========= =========
The accompanying notes are an integral part of these condensed financial
statements.
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ENESCO GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
THREE MONTHS ENDED MARCH 31, 2001 AND 2000
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2001 2000
---- ----
Net revenues $ 62,745 $ 73,460
Cost of sales 34,228 39,430
--------- ---------
Gross profit 28,517 34,030
Selling, distribution, general and administrative expenses 34,051 32,642
--------- ---------
Operating profit (loss) (5,534) 1,388
Interest expense (572) (657)
Interest income 122 153
Amortization of goodwill (489) (535)
Other income (expense) 20 (75)
--------- ---------
Income (loss) before income taxes (6,453) 274
Income tax expense (benefit) (3,013) 110
--------- ---------
Net income (loss) (3,440) 164
Retained earnings, beginning of period 337,615 326,305
Cash dividends, $.28 per share in 2000 - (3,782)
--------- ---------
Retained earnings, end of period $ 334,175 $ 322,687
========= =========
Earnings Per Common Share:
Basic and diluted $ (0.25) $ 0.01
========= =========
The accompanying notes are an integral part of these condensed financial
statements.
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ENESCO GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2001 AND 2000
(UNAUDITED)
(IN THOUSANDS)
OPERATING ACTIVITIES: 2001 2000
---- ----
Net income (loss) $ (3,440) $ 164
Adjustments to reconcile net income to net
cash provided by operating activities 4,036 (176)
-------- --------
Net cash provided (used) by operating activities 596 (12)
-------- --------
INVESTING ACTIVITIES:
Purchase of property, plant & equipment (1,059) (1,200)
Proceeds from sales of property, plant & equipment - 74
-------- --------
Net cash provided (used) by investing activities (1,059) (1,126)
-------- --------
FINANCING ACTIVITIES:
Cash dividends - (3,782)
Notes and loans payable (1,541) (893)
Common stock issuance 217 509
-------- --------
Net cash used by financing activities (1,324) (4,166)
-------- --------
Effect of exchange rate changes on cash and cash equivalents (116) (131)
-------- --------
Increase (decrease) in cash and cash equivalents (1,903) (5,435)
Cash and cash equivalents, beginning of year 4,006 10,819
-------- --------
Cash and cash equivalents, end of quarter $ 2,103 $ 5,384
======== ========
The accompanying notes are an integral part of these condensed financial
statements.
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ENESCO GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
The consolidated condensed financial statements and related notes included this
report have been prepared by Enesco, without audit, except for the December 31,
2000 condensed balance sheet, which came from Enesco's Annual Report on Form
10-K for the year ended December 31, 2000, under the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although we believe that the disclosures
are adequate to make the information presented not misleading. The information
furnished reflects all normal recurring adjustments that are, in our opinion,
necessary to a fair presentation of the results of operations and financial
condition for the interim periods. Reclassifications were made to the 2000
financial statements to include shipping and handling costs billed to customers
in revenues. Previously, shipping and handling costs billed to customers were
netted against the related costs included in cost of sales. It is suggested that
these condensed financial statements be read in conjunction with the financial
statements and related notes to consolidated financial statements included in
Enesco's Annual Report on Form 10-K for the year ended December 31, 2000.
1. ACCOUNTING POLICIES:
Enesco's financial statements for the three months ended March 31, 2001 have
been prepared in accordance with the accounting policies described in Note 1 to
the December 31, 2000 consolidated financial statements included in our 2000
Annual Report on Form 10-K. We consider all highly liquid securities, including
certificates of deposit with maturities of three months or less, when purchased,
to be cash equivalents. Accounts receivable are stated net of reserves for
uncollectible accounts, returns and allowances of $6.7 million at March 31, 2001
and $7.3 million at December 31, 2000.
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Enesco recognizes revenue when title passes to its customers which generally
occurs when merchandise is turned over to the shipper. A provision for
anticipated merchandise returns and allowances is recorded based upon historical
experience. Amounts billed to customers for shipping and handling are included
in revenue. License and royalty fees received by Enesco are recognized as
revenue when earned.
Adoption of SAB 101 "Revenue Recognition" in the fourth quarter of 2000 and EITF
00-22 "Accounting for Points and Certain Other Time-Based or Volume-Based Sales
Incentive Offers, and Offers for Free Products or Services to be Delivered in
the Future" in the first quarter of 2001 did not affect Enesco's accounting and
reporting policies. In accordance with EITF 00-10 "Accounting for Shipping and
Handling Fees and Costs" (which was adopted in the fourth quarter 2000) Enesco
classifies shipping and handling costs billed to customers as revenue and the
related costs are classified as cost of sales. Revenue and cost of sales for the
first quarter of 2000 were restated to include the shipping and handling costs
billed to customers. Adoption of SFAS 133 "Accounting for Derivative Instruments
and Hedging Activities" on January 1, 2001 did not have a material impact on the
results of operations or financial condition.
Enesco paid cash for interest and taxes as follows (in thousands):
Three Months Ended
March 31
--------
2001 2000
---- ----
Interest $ 540 $ 570
Income taxes $ 76 $ 588
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2. COMPREHENSIVE INCOME:
The other comprehensive income consists only of cumulative translation
adjustments. Comprehensive income (loss) for the three months ended March 31,
2001 and 2000 was as follows (in thousands):
Three Months Ended
March 31
--------
2001 2000
---- ----
Net income (loss) $(3,440) $ 164
Other comprehensive income (loss):
Cumulative translation adjustments (no tax effects) (1,846) (503)
--------------------
Comprehensive income (loss) $(5,286) $ (339)
====================
3. GEOGRAPHIC OPERATING SEGMENTS:
Enesco operates in one industry segment, predominately in two major geographic
areas (United States and International). The following tables summarizes
Enesco's operations by geographic area for the three months ended March 31, 2001
and 2000 (in thousands):
Three Months Ended
March 31
--------
2001 2000
---- ----
NET SALES:
United States $ 46,206 $ 56,488
United States intercompany (724) (585)
International 17,549 18,014
International intercompany (286) (457)
------------------------
Total consolidated $ 62,745 $ 73,460
========================
OPERATING PROFIT (LOSS):
United States $ (5,903) $ 278
International 369 1,110
------------------------
Total consolidated $ (5,534) $ 1,388
========================
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Transfers between geographic areas are made at the market value of the
merchandise transferred. No single customer accounted for 5% or more of
consolidated net sales. Export sales to foreign unaffiliated customers represent
less than 10% of consolidated net sales.
There were no material changes in assets from the amount disclosed in Enesco's
December 31, 2000 Annual Report and the basis of geographic area measurement of
sales and operating profit did not change in 2001.
4. INVENTORY CLASSES:
The major classes of inventories at March 31, 2001 and December 31, 2000 were as
follows (in thousands):
March 31, December 31,
2001 2000
---- ----
Raw materials and supplies $ 639 $ 574
Work in progress 101 87
Finished goods in transit 9,115 9,483
Finished goods 50,800 50,347
-------------------------
$60,655 $60,491
=========================
5. CORPORATE HEADQUARTERS CLOSING RESERVE:
Enesco's corporate headquarters closing reserve, which was established
in 1997, provided for severance and benefits payments due to terminated
employees. During the first quarter of 2001, the Company made $600 thousand of
payments which were charged against the corporate headquarters closing reserve.
At March 31, 2001, $2.8 million remained in the reserve, the majority of which
is for future severance payments.
6. OTHER INCOME (EXPENSE):
Other income (expense) for the three months ended March 31, 2001 and 2000
consists of the following (in thousands):
Three Months Ended
March 31
--------
2001 2000
---- ----
Foreign currency loss $ (1) $(57)
Gain (loss) on sale of fixed assets 1 (3)
Miscellaneous 20 (15)
-------------------
$ 20 $(75)
===================
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7. EARNINGS PER COMMON SHARE (BASIS OF CALCULATIONS):
Basic earnings per common share are based on the average number of common shares
outstanding during the period covered. Diluted earnings per common share
assumes, in addition to the above, a dilutive effect of common share equivalents
during the period. Common share equivalents represent dilutive stock options and
warrants using the treasury stock method.
The number of shares used in the earnings per share calculations for the three
months ended March 31, 2001 and 2000 were as follows (in thousands):
Three Months Ended
March 31
--------
2001 2000
---- ----
Basic
Average common shares outstanding 13,637 13,506
Diluted
Stock options/warrants - -
---------------------
Average shares diluted 13,637 13,506
=====================
The average number of shares outstanding for the first quarter of 2001 excluded
the common stock equivalents of options and warrants since the impact on the
reported net loss per share was antidilutive. Inclusion of the options and
warrants would have increased the average shares outstanding by 86,000. The
average shares outstanding for the first quarter of 2000 did not include common
stock equivalents of options since the exercise price of all options exceeded
the market price during the quarter.
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8. DERIVATIVE FINANCIAL INSTRUMENTS:
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", as amended by SFAS No. 137 and SFAS No.
138. The Statement establishes accounting and reporting standards requiring that
derivative instruments be recorded in the balance sheet as either an asset or a
liability measured at its fair value. The Statement requires that changes in the
fair value of derivatives be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows derivative gains and losses to offset related results on the hedged item
in the income statement and requires that a company formally document, designate
and assess the effectiveness of transactions that receive hedge accounting. The
adoption of SFAS No. 133 on January 1, 2001 did not have a material impact on
the consolidated financial condition or results of operations of Enesco.
Enesco operates globally with various manufacturing and distribution facilities
and product sourcing locations around the world. Enesco may reduce its exposure
to fluctuations in interest rates and foreign exchange rates by creating
offsetting positions through the use of derivative financial instruments. Enesco
currently does not use derivative financial instruments for trading or
speculative purposes. Enesco regularly monitors its foreign currency exposures
and ensures that the hedge contract amounts do not exceed the amounts of the
underlying exposures.
Enesco's current hedging activity is limited to foreign currency purchases and
intercompany foreign currency transactions. The purpose of Enesco's foreign
currency hedging activities is to protect Enesco from the risk that the eventual
settlement of foreign currency transactions will be adversely affected by
changes in exchange rates. Enesco hedges these exposures by entering into
various short-term foreign exchange forward contracts. Under SFAS No. 133, the
instruments are carried at fair value in the condensed consolidated balance
sheet as a component of other current assets or other current liabilities.
Changes in the fair value of foreign exchange forward contracts that meet the
applicable hedging criteria of SFAS No. 133 are recorded as a component of other
comprehensive income and reclassified into earnings in the same period during
which the hedged transaction affects earnings. Changes in the fair value of
foreign
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exchange forward contracts that do not meet the applicable hedging criteria of
SFAS No. 133 are recorded currently in income as cost of sales or foreign
exchange gain or loss, as applicable. Enesco's hedging activities did not have a
material impact on Enesco's results of operations or financial condition during
the quarter ended March 31, 2001.
9. SUBSEQUENT EVENT:
On May 3, 2001 Enesco reduced its workforce in the United States by 120
positions, or approximately 14%. This workforce reduction affected union,
non-union, clerical and professional employees and will generate annual savings
of approximately $8 million. One-time severance costs approximating $500
thousand will be recorded in the second quarter of 2001.
10. NEW PRESIDENT AND CEO:
Daniel DalleMolle was elected as President and Chief Executive Officer (CEO) of
Enesco as of March 28, 2001. Mr. DalleMolle succeeded interim CEO Anne-Lee
Verville. The President and CEO position had been vacant since the resignation
of Jeffrey A. Hutsell on June 27, 2000. Mr. DalleMolle was also appointed to
Class II of the Board of Directors on March 28, 2001. His Board term will expire
on April 24, 2003.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ENESCO GROUP, INC.
THREE MONTHS ENDED MARCH 31, 2001
The information set forth below should be read in conjunction with the unaudited
consolidated condensed financial statements and notes thereto included in Part I
- - Item 1 of the Quarterly Report and the Company's Annual Report on Form 10-K
for the year ended December 31, 2000 which contains the audited financial
statements and notes thereto for the years ended December 31, 2000, 1999, and
1998 and Management's Discussion and Analysis of Financial Condition and Results
of Operations for those respective periods.
RESULTS OF OPERATIONS:
First quarter 2001 sales decreased 15% compared to the same period in 2000. The
majority of the decline continues to be focused in the United States card, gift,
and collectible channels. Unfilled orders at the beginning of the year were down
$2 million, or 4%, compared to the same period last year and new orders for the
first quarter of 2001 were down 25% compared to 2000.
Enesco's Precious Moments lines represented approximately 45% of first quarter
2001 sales, compared to 43% in 2000 and the Cherished Teddies lines represented
approximately 13% of 2001 sales, compared to 16% in 2000.
Net international sales decreased 2% and represented 28% of this year's first
quarter sales compared to 24% in 2000. Local currency international sales were
translated into United States dollars at lower exchange rates in 2001 versus
2000. If the year-to-date 2001 local currency sales were translated into United
States dollars at the 2000 exchange rates, sales would have been approximately
$1.4 million higher in 2001.
Unfilled orders (backlog) as of March 31, 2001, were down approximately $20
million, or 22%, compared to the same period last year. Orders received and
approved by Enesco,
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are subject to cancellation for credit considerations, inventory shortages and
customer requests.
The gross margin for the first quarter decreased compared to 2000 following the
sales decrease. Enesco's gross profit margin expressed as a percentage of sales
was 45% in 2001 compared to 46% in 2000. The decrease was due to lower margins
in the United States due to product and sales channel mix, as all products and
channels do not have the same gross margin.
Selling, distribution, general and administrative expenses increased 4% in the
first quarter of 2001 versus 2000 and represented 54% of net sales in 2001 and
44% in 2000. The increase was due mainly to one-time costs of $1.8 million
related to the United States sales force reorganization announced in November,
2000. The one-time costs of $1.8 million consisted of commissions on orders
placed before January 1, 2001 that were shipped in 2001, as well as the hiring
and training costs for approximately 200 employees. The 2001 expenses were a
higher percentage of sales mainly due to the impact of lower sales on fixed
costs.
Due to the above factors, the first quarter 2001 operating loss was $5.5 million
compared to a $1.4 million operating profit last year with the majority of the
decrease in the United States.
To address declining sales and operating income, Enesco is embarking on several
profit improvement initiatives. The first initiative was announced in May 2001
to reduce the workforce in the United States by 120 positions, or 14%. The
one-time costs for this workforce reduction will approximate $500 thousand and
the workforce reduction will generate annual savings of approximately $8
million. Additionally, Enesco will restructure its Operations, Marketing and
Sales Departments to improve efficiencies in the supply chain and product
development cycle. The workforce reductions and restructuring will immediately
reduce costs and are expected to better position Enesco for future growth.
INTEREST EXPENSE decreased in the first quarter of 2001 due to lower average
borrowings and lower interest rates. Interest income was lower in the 2001 first
quarter
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due to lower cash balances. Amortization of goodwill decreased in the 2001 first
quarter based on the completion of an asset's amortization period at the end of
2000.
INCOME TAX benefit in the first quarter of 2001 was 46.7% of the pre-tax loss
and the income tax provision for first quarter of 2000 was 40% of the pre-tax
earnings. The higher effective rate reflects the impact of non-deductible
expenses (goodwill) and the geographical mix of earnings. The actual effective
tax rates are dependent upon numerous factors and actual results may vary.
INTERNATIONAL ECONOMIES AND CURRENCY:
The value of the U.S. dollar versus international currencies where Enesco
conducts business impacts the results of these businesses. Fluctuations in the
value of the U.S. dollar versus international currencies affect the U.S. dollar
translation value of international currency denominated balance sheet items. The
changes in the balance sheet dollar values due to international currency
translation fluctuations are recorded as a component of shareholders' equity. In
addition to the currency risks, Enesco's international operations, including
sources of imported products, are subject to risks of doing business abroad,
including reliance on third party overseas manufacturers, import or export
restrictions and changes in economic and political climates.
FINANCIAL CONDITION:
Enesco has historically satisfied its capital requirements with internally
generated funds and short-term loans. Working capital requirements fluctuate
during the year and are generally greatest during the third quarter and lowest
at the beginning of the first quarter.
The major sources of funds in the first quarter of 2001 from operating
activities were from depreciation, amortization, and lower accounts receivable
due to lower sales. Accounts receivable days sales outstanding also decreased
from 2000 due to more stringent domestic credit policies implemented in the
third quarter of 2000. Accounts payable and accrued expenses decreased from
year-end levels due to timing of payments and the impact of lower sales volumes.
The corporate headquarters closing reserve at March 31, 2001 totaled $2.8
million, a decrease of $600 thousand from year-end. Due to the duration and
timing of severance provisions and related benefits, the reserve will not be
fully utilized until the first quarter of 2004. The reserve is expected to be
utilized as
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follows: $1.4 million for remainder of 2001, $800 thousand reduction in 2002,
$500 thousand reduction in 2003 and $100 thousand reduction in 2004.
Enesco has filed and continues to file tax returns with a number of taxing
authorities worldwide. While we believe such filings have been and are in
compliance with applicable laws, regulations and interpretations, positions
taken are subject to challenge by the taxing authorities often for an extended
number of years after the filing dates. Enesco has established accruals for tax
assessments. These accruals are included in current income taxes payable since
it is uncertain as to when assessments may be made and paid. Based upon Enesco's
current liquid asset position and credit facilities, Enesco believes it has
adequate resources to fund any such assessments. To the extent accruals differ
from actual assessments or when the open tax years are closed, the accruals will
be adjusted through the provision for income taxes. The majority of the open tax
years become closed at the end of December for the particular open year.
The major use of cash in investing activities in the first quarter of 2001 was
for capital expenditures. Capital expenditures of $7 million are currently
anticipated for 2001.
The major use of cash in financing activities in the first quarter of 2001 was
the reduction of short term debt. The principal sources of Enesco's liquidity
are its available cash balances, cash from operations and available financing
alternatives.
In August 2000, Enesco entered into a $50 million revolving credit facility with
Fleet National Bank to replace an existing credit facility. The Fleet credit
agreement contains financial and operating covenants including restrictions on
indebtedness and liens, selling property, repurchasing our stock and paying
dividends. In addition, Enesco is required to satisfy consolidated net worth,
fixed charge coverage ratio and leverage ratio tests at the end of each quarter.
In March 2001, Enesco agreed to modify its credit agreement with Fleet, which
included a modification of the financial covenants. Enesco further agreed in
April 2001, to modify the Fleet credit agreement to reduce the commitment to $25
million and to grant Fleet a security interest in inventory and accounts
receivable. These modifications are not expected to have a material effect on
Enesco's liquidity or the ability of Enesco to meet
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working capital requirements. Enesco is in the early stages of syndicating a new
credit facility. Management expects the new credit facility to be in place by
July 31, 2001.
CURRENT AND PENDING ACCOUNTING STANDARDS:
EITF 00-14 "Accounting for Certain Sales Incentives" and EITF 00-25 "Vendor
Income Statement Characterization of Consideration from a Vendor to Retailer"
will become effective later this year. Enesco has determined that EITF 00-14
will not materially impact its results of operations and financial condition.
The impact of EITF 00-25, while not expected to have a material impact, is
currently under review.
Adoption of SAB 101 "Revenue Recognition" in the fourth quarter of 2000 and EITF
00-22 "Accounting for Points and Certain Other Time-Based or Volume-Based Sales
Incentive Offers, and Offers for Free Products or Services to be Delivered in
the Future" in the first quarter of 2001 did not affect Enesco's accounting and
reporting policies. In accordance with EITF 00-10 "Accounting for Shipping and
Handling Fees and Costs" (which was adopted in the fourth quarter 2000) Enesco
classifies shipping and handling costs billed to customers as revenue and the
related costs are classified as cost of sales. Revenue and cost of sales for the
first quarter of 2000 were restated to include the shipping and handling costs
billed to customers. Adoption of SFAS 133 "Accounting for Derivative Instruments
and Hedging Activities" on January 1, 2001 did not have a material impact on the
results of operations or financial condition.
FORWARD LOOKING STATEMENTS:
This Form 10-Q including all information incorporated by reference into this
Form 10-Q, contains certain forward-looking statements within the meaning of the
Federal securities laws. These forward-looking statements may include the words
"believe," "expect," "plans" or similar words and are based in part on Enesco's
reasonable expectations and are subject to a number of factors and risks, many
of which are beyond Enesco's control. Enesco's future results may differ
materially from its current results and actual results could differ materially
from those projected in the forward-looking statements contained in, and
incorporated by reference into, this Form 10-Q as a result of certain factors
including, but not limited to, those set forth below. Readers should also
carefully review any risk factors described in other documents that we file from
time to time with the Securities and Exchange Commission:
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- Our ability to manufacture, increase capacity, source and ship new and
continuing product in a timely manner and consumers' acceptance of
those products at prices that will be sufficient to profitably recover
development, manufacturing, marketing, royalty and other costs of the
products;
- Economic conditions including retail sales, higher fuel prices,
currency fluctuations and government regulation and other actions in
the various markets in which we operate throughout the world;
- The inventory policies of retailers, together with the increased
reliance by retailers on quick response inventory management
techniques, which increase the risk of underproduction of popular
items, overproduction of less popular items and failure to achieve
tight and compressed shipping schedules;
- The impact of competition on revenues, margins and other aspects of
Enesco's business, including the ability to secure, maintain and renew
popular licenses and the ability to attract and retain talented
employees in a competitive environment.
In light of these uncertainties and risks, there can be no assurance that the
forward-looking statements in this Form 10-Q will occur or continue in the
future. Except for required, periodic filings under the Securities Exchange Act
of 1934, Enesco undertakes no obligations to release publicly any revisions to
these forward looking statements that may reflect events or circumstances after
the date hereof or to reflect the occurrence of unanticipated events.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information required by this item either is set forth in Exhibit 13 to Enesco's
Annual Report on Form 10-K for the year ended December 31, 2000, as updated by
Note 8 to the Consolidated Condensed Financial Statements included in Item 1
herein, or is immaterial. To manage Enesco's foreign currency risk, as of March
31, 2001 Enesco had entered into forward exchange agreements with a notional
value of $14.2 million, the majority of which matured on April 2, 2001. The fair
value is not significant.
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PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Stockholders was held on April 26, 2001.
(b)(c) The first matter voted upon at the meeting was the election of
Directors. The members of Class III were standing for election to a
three-year term expiring at the Annual Meeting in 2004. Upon motion
duly made and seconded, it was voted to elect John F. Cauley, George
Ditomassi and Anne-Lee Verville as Class III Directors for a
three-year term expiring at the Annual Meeting in 2004 and until their
successors are elected and qualified. The votes for each of the
candidates were reported as follows:
John F. Cauley For: 12,141,975
Withheld: 177,839
George M. Ditomassi For: 12,172,000
Withheld: 147,814
Anne-Lee Verville For: 11,428,538
Withheld: 891,276
In addition, the following directors continue to serve on the Board:
Daniel DalleMolle, Eugene Freedman, Judith R. Haberkorn, Donna Brooks
Lucas, Homer G. Perkins, Thane A. Pressman.
The second matter voted upon at the meeting was the approval and
ratification of the Board's appointment of Arthur Andersen LLP as
independent accountants for 2001. Upon motion duly made and seconded,
it was voted that the appointment by the Board of Directors at its
February 28, 2001 meeting of Arthur Andersen LLP, independent
certified public accountants, as independent accountants for the
Company for its fiscal year ending December 31, 2001 be ratified and
approved. The votes for the independent accountants were reported as
follows:
Arthur Andersen LLP For: 12,197,215
Against: 95,144
Abstain: 27,455
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Fourth Amendment to Amended and Restated Senior Resolving Credit
Agreement
10.2 Daniel DalleMolle Employment Agreement
(b) Reports on Form 8-K
No reports on Form 8-K were filed by Enesco during the quarter for
which this report is filed.
All other items hereunder are omitted because either such item is inapplicable
or the response to it is negative.
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ENESCO GROUP, INC.
(Registrant)
Date: May 15, 2001 /s/ Daniel DalleMolle
-----------------------------------------
Daniel DalleMolle
President and Chief Executive Officer
Date: May 15, 2001 /s/ Jeffrey W. Lemajeur
-----------------------------------------
Jeffrey W. Lemajeur
Chief Financial Officer
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