Enesco (NYSE:ENC)
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Enesco Group, Inc. (NYSE:ENC), a leader in the giftware,
and home and garden decor industries, today announced a comprehensive
plan to improve the Company's operating performance and establish a
platform for gaining increased share of the $30 billion to $40 billion
wholesale gift market in the U.S., U.K. and Canada.
As a result of the recently adopted operating improvement plan to
be executed throughout 2006, the Company anticipates achieving pre-tax
cost savings on an annualized basis in the range of $34 million to $38
million. These cost savings include approximately $12 million in
expenses related to the termination of the Precious Moments license
agreement, bank penalty fees, severance costs and accelerated
depreciation related to the Enterprise Resource Planning system as
previously reported by the Company which are not expected to recur in
future years. The cost savings are anticipated to be fully realized in
2007.
The Company's plan will center around three key initiatives:
rationalizing the product portfolio; reducing corporate overhead,
general and administrative and marketing costs; and creating a more
efficient and cost-effective distribution and warehousing model.
-- Product Portfolio: The Company intends to reduce its number of
overall product lines from approximately 170 to between 50 and
60 to concentrate on giftable products which elicit strong and
sustainable market demand and profitability, and leverage
Enesco's core distribution base. The Company expects to
eliminate those product lines that do not meet these criteria.
-- Corporate Overhead, General and Administrative and Marketing:
The Company intends to reduce corporate and general and
administrative costs, as well as professional and consulting
fees by $30 million to $32 million pre-tax on an annualized
basis.
-- Distribution and Warehousing: The Company expects to implement
strategies to bring its distribution and warehousing costs
more in line with industry standards, while improving quality
and service levels. Cost savings are expected to be in the
range of $4 million to $6 million pre-tax on an annualized
basis.
The Company's goal is to implement an operating model commensurate
with other leading companies in the giftware and related markets. This
operating model will target gross margins in the range of 40% to 45%
and an operating profit margin of 3% to 5% to be achieved in 2007.
Cynthia Passmore-McLaughlin, President and CEO, commented, "Our
exhaustive study of the business has resulted in a plan to transform
Enesco by rationalizing our product lines around our best performing
and most profitable merchandise categories, and producing an
organizational structure properly sized to the scale of the Company's
current business. The evaluation of our business and industry was not
only completed to identify ways to generate cost savings but also to
maximize future revenue potential. The Company will concentrate on
merchandise categories in which Enesco can leverage its key
competitive advantages of market leadership, proprietary products and
channels of distribution. When fully implemented, we will be a much
leaner, more focused and efficient company with gross and operating
margins more in line with our peers. We have begun to implement the
changes outlined in our plan."
Ms. Passmore-McLaughlin concluded with an update on the Company's
current credit facility, "As previously announced, we had reset the
EBITDA and capital expenditure covenant minimums on our credit
facility in August. We continue to make progress regarding replacement
financing. As we continue to comply with our bank covenants or exceed
the plan accepted by our banks, we believe we are better positioned to
secure replacement financing that is favorable for the Company for the
near- and long-term."
Conference Call
A conference call will be broadcast live on Wednesday, September
28, at 9:00 a.m. Central (10:00 a.m. Eastern) to discuss the plan for
operating improvement. Investors interested in participating on the
live call can do so by calling 1-888-271-7222, and asking for the
Enesco investor conference call. Investors also may listen to the live
call via a Webcast at www.enesco.com and click on "Investor
Relations," or by logging on to 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: 9906607.
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 Europe, Canada, Australia, Mexico, 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,
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.
This press release contains forward-looking statements, which
reflect management's current assumptions and beliefs and are based on
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 Cherished Teddies, Heartwood Creek and Disney licenses; the
Company's ability to grow revenues in mass and niche market channels;
the Company's success in implementing its comprehensive plan for
operating improvement and its achievement of its goals for cost
savings and market share increases; the Company's ability to comply
with covenants contained in its credit facility; the Company's ability
to obtain a new global senior credit facility; 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.