Enesco Group, Inc. Reports Fourth Quarter and Full Year 2003 Results
ITASCA, Ill.--(BUSINESS WIRE)--Feb. 25, 2004--
Success of new product lines and strategic partnerships continue
to drive positive trends in revenue and earnings
Enesco Group, Inc. (NYSE:ENC), a leader in the gift, collectible
and home decor industries, today reported results for the fourth
quarter and year ended December 31, 2003.
Fourth Quarter Highlights
-- Revenue grew 11 percent to $70.3 million, compared to Q4 2002
revenue of $63.4 million.
-- Gross profit margin improved 5.8 percentage points to 49.7
percent from 43.9 percent in Q4 2002.
-- Operating profit of $9.3 million increased 67 percent compared
to the same quarter last year.
Financial Results - Fourth Quarter 2003
For the fourth quarter of 2003, Enesco reported total revenue of
$70.3 million, an increase of 11 percent over revenue of $63.4 million
for the fourth quarter of 2002. This marks the second consecutive
quarter of revenue expansion for the Company and includes $3.0 million
associated with the Bilston & Battersea acquisition, as well as a $3.0
million favorable impact from changes in foreign currency translation
rates. Excluding the currency translation impact and the acquisition,
revenue from International operations increased by 6 percent and
revenue from U.S. operations stabilized year-over-year.
Enesco realized gross profit of $35.0 million, which represents a
26 percent increase from the fourth quarter of 2002. The increase this
quarter was largely attributable to the success of newly introduced,
higher-margin product lines, the continued rationalization of
customers and products, and lower royalty costs negotiated with
certain licensors. The Bilston & Battersea acquisition and the changes
in currency translation rates also favorably impacted gross margin for
the quarter.
Operating expenses were $25.7 million, increasing modestly to 36.5
percent of revenue versus 35.1 percent during the same period in the
prior year. This included $0.7 million of Bilston & Battersea expenses
and $0.9 million related to currency translation rate impacts.
Continued cost control and margin improvement drove operating profit
of $9.3 million for the fourth quarter of 2003, an increase of 67
percent over the same period a year ago.
Net income for the quarter of $13.3 million included a $6.8
million benefit related to the adjustment of prior year income tax
accruals. A similar adjustment of $12.9 million was recorded in the
fourth quarter of 2002, leading to a net income of $15.9 million.
Earnings per diluted share for the quarter was $0.90 versus $1.12 per
diluted share in the fourth quarter of 2002.
Full Year 2003 Highlights
-- In light of ongoing customer and product rationalization,
revenue for the year was $249.1 million compared to revenue of
$253.8 million last year.
-- Successful new product introductions drove a gross profit
margin improvement of 2.9 percentage points to end the year at
45.1 percent of sales.
-- Operating profit of $15.9 million increased 16 percent when
compared to $13.8 million last year.
Financial Results - Full Year 2003
For 2003, Enesco reported total revenue of $249.1 million, a
decline of less than 2 percent when compared to revenue of $253.8
million for 2002. This year's revenue stabilization significantly
reduces the declining trend of the past six years. Included in total
revenue was $6.9 million from the Bilston & Battersea acquisition and
$8.7 million due to changes in foreign currency translation rates.
Total revenue for the year was significantly impacted by a weak first
quarter in U.S. sales, which was partially offset by improvements in
the third and fourth quarters.
Gross profit of $112.2 million was $5.1 million, or 5 percent
higher than the prior year's $107 million. The introduction and
success of new higher-margin product lines this year significantly
contributed to this increase. The Bilston & Battersea acquisition,
changes in foreign currency translation rates, and the continued
rationalization of customers and products also drove margins higher
for the year.
Operating expenses for the year were $96.3 million, compared to
$93.3 million in 2002. While continued cost control efforts resulted
in a $1.8 million reduction in expenses for the year, these reductions
were offset by $1.9 million of Bilston & Battersea expenses and $2.9
million related to currency translation, resulting in an overall
increase of 3 percent compared to 2002. Operating profit of $15.9
million for 2003 improved 16 percent from $13.8 million in the prior
year, due to favorable gross profit performance and continued expense
control.
Net income for the year of $17.3 million, included a $6.8 million
benefit related to the adjustment of prior year income tax accruals.
The Company experienced a net loss for 2002 of $8.4 million, which
included a $12.9 million benefit related to the adjustment of prior
year income tax accruals and a $29.0 million charge related to the
cumulative effect of a change in accounting principle. Earnings per
diluted share for the year was $1.23 versus a loss of $0.60 per
diluted share in 2002.
"Our operating improvements accelerated during the second half of
the year, and we entered 2004 with considerable momentum," said Dan
DalleMolle, president and CEO of Enesco. "Our rigorous focus on
customer, product, and distributor rationalization is clearly paying
off. We remain focused on controlling costs while enhancing growth
through internal product development as well as through strategic
alliances and acquisitions to increase Enesco's global presence going
forward. We expect the combination of these factors to continue to
drive our return on assets and maximize shareholder value."
A conference call will be broadcast live on Thursday, February 26,
2004, at 10:00 a.m. Central Time (11:00 a.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, where you can download
RealPlayer for free.
For a phone replay, call 800-642-1687. Passcode: 5050378. The
replay will be available for one week following the call.
About Enesco Group, Inc.
Enesco Group, Inc. is a world leader in the gift, collectible and
home decor industries. Serving more than 40,000 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 Europe, 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 leads the industry.
The Company's product lines include some of the world's most
recognizable brands, including Precious Moments, Walt Disney Classics
Collection, Nickelodeon, Heartwood Creek, Halycon 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 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: 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, and Disney; the
Company's ability to grow revenues in mass and niche market channels;
the Company's ability to identify and close on strategic acquisitions;
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.
ENESCO GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Fourth Quarter and Year Ended December 31, 2003 and 2002
(In thousands, except per share amounts)
Fourth Quarter Year
--------------------------- -----------------------------
2003 2002 %Change 2003 2002 %Change
---- ---- ------- ---- ---- -------
Net revenues $70,270 $63,379 11% $249,059 $253,788 -2%
Cost of sales 35,312 35,587 -1% 136,844 146,696 -7%
-------- -------- --------- ---------
Gross profit 34,958 27,792 26% 112,215 107,092 5%
Gross Profit % 49.7% 43.9% 45.1% 42.2%
Selling, distribution,
general and
administrative
expense 25,679 22,220 16% 96,299 93,322 3%
-------- -------- --------- ---------
Operating profit 9,279 5,572 67% 15,916 13,770 16%
Interest expense (146) (242) (787) (747)
Interest income 65 72 537 286
Other income
(expense), net (360) (423) (1,334) (1,533)
-------- -------- --------- ---------
Income before income taxes
and cumulative effect of
a change in accounting
principle 8,838 4,979 14,332 11,776
Income tax
benefit (1) (4,464) (10,903) (2,950) (8,897)
-------- -------- --------- ---------
Income before cumulative
effect of a change in
accounting
principle 13,302 15,882 -16% 17,282 20,673 -16%
Cumulative effect of a
change in accounting
principle, net of
income taxes (2) - - - (29,031)
-------- -------- --------- ---------
Net income
(loss) $13,302 $15,882 -16% $17,282 $(8,358)n/m(3)
======== ======== ========= =========
Earnings (loss) per share:
Income before cumulative
effect of a change in
accounting principle
Basic $0.94 $1.14 $1.23 $1.49
Diluted $0.90 $1.12 $1.20 $1.47
Basic and diluted
cumulative effect of a
change in accounting
principle, net of
income taxes $0.00 $0.00 $0.00 ($2.09)
Net income (loss):
Basic $0.94 $1.14 $1.23 ($0.60)
Diluted $0.90 $1.12 $1.20 ($0.60)
Average basic shares
outstanding 14,122 13,899 14,028 13,854
Average diluted shares
outstanding 14,779 14,167 14,444 14,110
(1) Provisions for income taxes includes a $6.8 million benefit for
the fourth quarter of 2003, and a $12.9 million benefit for the
fourth quarter of 2002 related primarily to prior year tax
accruals which were no longer required.
(2) Amortization of goodwill ceased after 2001, per FAS 142. In 2002,
goodwill impairment is recorded as the cumulative effect of a
change in accounting principle in accordance with FAS 142.
(3) n/m = not meaningful
ENESCO GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS
December 31,
------------------
2003 2002
------------------
Current Assets:
Cash and equivalents $10,645 $17,418
Accounts receivable, net 65,190 54,347
Inventories 60,820 48,334
Other current assets 9,260 10,077
------------------
Total current assets 145,915 130,176
Property, plant and equipment, net 28,341 26,229
Other assets 28,212 23,380
------------------
Total assets $202,468 $179,785
==================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes and loans payable $2,858 $-
Accounts payable 21,723 18,395
Federal, state and foreign income taxes 7,375 15,416
Total accrued expenses 19,609 20,266
------------------
Total current liabilities 51,565 54,077
Total long-term liabilities 3,551 3,795
Minority interest 114 -
Total shareholders' equity 147,238 121,913
------------------
Total liabilities and shareholders' equity $202,468 $179,785
==================
CONTACT: Enesco Group, Inc.
Tom Bradley (Investors), 630-875-5990
jgadzins@enesco.com
or
Donna Shaults (Media), 630-875-5464
dshaults@enesco.com