Enesco Group, Inc. Reports Third Quarter 2005 Financial Results

Business Wire, Nov 9, 2005

ITASCA, Ill. -- 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.