Exhibit 99
Enesco Group, Inc. Reports Third Quarter 2004 Results
ITASCA, Ill.--(BUSINESS WIRE)--Nov. 2, 2004--Enesco Group, Inc.
(NYSE:ENC), a leader in the giftware, collectible and home decor
industries, today reported results for the third quarter ended
September 30, 2004.
Third Quarter 2004 Summary
-- Revenue of $84.2 million was 17% higher than 3Q'03; gross
profit of $34.2 million increased by 10% from 3Q'03.
-- Third quarter gross margin and operating income were impacted
by costs associated with the Company's Enterprise Resource
Planning (ERP) system.
-- Incoming orders continue to outpace prior year levels and an
encouraging customer response was seen at recent trade shows.
Financial Results
For the third quarter of 2004, Enesco reported total revenue of
$84.2 million, an increase of $12.4 million, or 17%, compared to
revenue of $71.8 million for the third quarter of 2003. The revenue
increase includes $7.4 million associated with the acquisitions of the
Walt Disney Classics Collection license, Gregg Gift Company and
Dartington Crystal. This increase also includes a $2.8 million
favorable impact from foreign currency exchange rates. The balance of
the sales increase, approximately $2.2 million, came from the core
business.
Gross profit of $34.2 million increased by 10%, compared to $31.1
million in the prior year, and is attributed primarily to revenue
increases. Gross profit as a percentage of sales declined by 2.8
points to 40.6% due to ERP-related costs and sales mix.
Operating expenses for the third quarter were $32.2 million, an
increase of $8.2 million from the prior year. Expenses for the quarter
related to the acquisitions were $3.1 million. Foreign currency
translation rate effects increased operating expenses by $0.9 million
for the quarter. The balance of the increase in expenses can be
primarily attributed to the continued costs associated with the ERP
system implementation, Sarbanes-Oxley compliance and executive
severance costs. An operating profit of $2.0 million for the third
quarter of 2004 compares to $7.1 million for the same period in 2003.
Enesco's net income of $1.0 million or $0.07 per diluted share
this quarter compares to $4.6 million or $0.32 per diluted share
during the same period last year.
As of September 30, 2004, Enesco had $53.7 million of interest
bearing debt outstanding, and all covenants under Enesco's revolving
credit agreement were complied with or waived. However, it is expected
that Enesco will be in violation of certain financial covenants as of
December 31, 2004. The Company's management is currently working with
its lenders, and on November 2, 2004 signed an amendment to its credit
facility providing that the December 31, 2004 covenants will be
amended on or before November 22, 2004. The November 2nd amendment
also provided that certain other provisions of the credit facility
will be further amended, including but not limited to, providing
security to the lenders on or before November 15, 2004. Because the
December 31, 2004 covenants have not yet been amended, Enesco has
reclassified $5.8 million of long-term debt to a current liability as
of September 30, 2004. There has been no demand for acceleration of
any debt payments by the lenders, and Enesco continues to borrow funds
under its domestic and international credit facilities to meet working
capital needs.
"We continue to make progress towards resolving our ERP system
issues. Enesco is in a much better position today than the Company was
three months ago," explained George Ditomassi, Interim CEO of Enesco.
"While we do expect to incur additional costs, we have identified the
major system problems and are focused on rectifying them as soon as
possible."
"We are pleased with the top line performance this quarter and the
overwhelming positive customer response at the recent trade shows,"
said Cynthia Passmore-McLaughlin, President of Enesco. "The continued
growing demand for Enesco's product offerings and the widespread
customer loyalty we've seen is an indication of the bright future the
Company has as a gift and home decor leader."
Separately, Enesco received notice earlier this week that the SEC
has terminated its investigation of the Company and a former officer,
and no enforcement action has been recommended.
A conference call will be broadcast live on Wednesday, November 3,
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, to download RealPlayer
for free.
For a phone replay, call 800-642-1687. Passcode: 1462497. 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 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, 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 Precious Moments, Walt Disney Classics
Collection, Nickelodeon, Heartwood Creek, 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 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.
ENESCO GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Third Quarter and Nine Months Ended September 30, 2004 and 2003
(In thousands, except per share amounts)
Third Quarter Nine Months
--------------------------- -----------------------------
2004 2003 % Change 2004 2003 % Change
-------- -------- --------- --------- --------- ---------
Net revenues $84,225 $71,766 17% $193,790 $178,789 8%
Cost of sales 50,027 40,628 112,165 101,532
-------- -------- --------- ---------
Gross profit 34,198 31,138 10% 81,625 77,257 6%
Gross profit % 40.6% 43.4% 42.1% 43.2%
Selling,
distribution,
general and
administrative
expense 32,194 24,009 34% 88,482 70,620 25%
-------- -------- --------- ---------
Operating
profit
(loss) 2,004 7,129 (6,857) 6,637
Interest
expense (350) (97) (624) (641)
Interest
income 90 66 345 472
Other income
(expense),
net (548) (339) (1,148) (974)
-------- -------- --------- ---------
Income (loss)
before income
taxes 1,196 6,759 (8,284) 5,494
Income tax
expense
(benefit) 157 2,162 (3,769) 1,514
-------- -------- --------- ---------
Net income
(loss) $1,039 $4,597 $(4,515) $3,980
======== ======== ========= =========
Earnings (loss)
per share:
Net income
(loss):
Basic $0.07 $0.33 ($0.32) $0.28
Diluted $0.07 $0.32 ($0.32) $0.28
Average basic
shares
outstanding 14,356 14,065 14,250 14,000
Average
diluted
shares
outstanding 14,669 14,461 14,849 14,344
ENESCO GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS
September 30, December 31,
2004 2003
------------- ------------
Current Assets:
Cash and equivalents $11,016 $10,645
Accounts receivable, net 99,167 65,190
Inventories 65,020 60,820
Other current assets 8,962 9,260
--------------------------
Total current assets 184,165 145,915
Property, plant and equipment, net 31,018 28,341
Other assets 35,589 28,212
--------------------------
Total assets $250,772 $202,468
==========================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes and loans payable $53,684 $2,858
Accounts payable 26,729 21,723
Federal, state and foreign income taxes 1,107 7,375
Total accrued expenses 19,930 19,608
--------------------------
Total current liabilities 101,450 51,564
Total long-term liabilities 3,609 3,551
Minority interest 90 114
Total shareholders' equity 145,623 147,239
--------------------------
Total liabilities and shareholders' equity $250,772 $202,468
==========================
CONTACT: Ashton Partners
Nathan Elwell, 312-553-6706 (Investor)
nelwell@ashtonpartners.com
or
Enesco Group, Inc.
Donna Shaults, 630-875-5464 (Media)
dshaults@enesco.com