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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: FEBRUARY 24, 1997
Date of Earliest Event Reported: FEBRUARY 20, 1997
DEPARTMENT 56, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1-11908 13-3684956
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation or organization) Identification No.)
ONE VILLAGE PLACE, 6436 CITY WEST PARKWAY, EDEN PRAIRIE, MN 55344
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (612) 944-5600
PAGE 1 OF 8
Exhibit Index on Page 4
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ITEM 5. OTHER EVENTS.
A copy of the Press Release dated February 20, 1997, is attached
hereto as Exhibit 99.1 and is incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
99.1 Press Release, dated February 20, 1997.
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Exhibit Index on Page 4
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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 hereunto duly authorized.
Date: February 24, 1997
DEPARTMENT 56, INC.
/s/ Mark R. Kennedy
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Mark R. Kennedy
Senior Vice President - Chief Financial Officer
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Exhibit Index on Page 4
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE
99.1 Press Release, dated February 20, 1997 5
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Exhibit Index on Page 4
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FOR IMMEDIATE RELEASE
DEPARTMENT 56 REPORTS 1996 EARNINGS
FIRST QUARTER ORDERS LOWER AS RETAIL INVENTORY
REDUCTION EFFORTS CONTINUE
February 20, 1997 - Eden Prairie, MN - Department 56 today reported revenue and
earnings for the fourth quarter and twelve months ended December 28, 1996. For
the quarter, revenue was $34.3 million, compared to $47.2 million in the prior
year. Net income was $4.2 million or $0.19 per share, compared to $5.5 million,
or $0.25 per share in the prior year.
For the year, revenue was $228.8 million compared to $252.0 million in the prior
year. Net income was $45.7 million or $2.10 per share compared to $47.9 million
or $2.20 per share in the prior year. Net income and earnings per share are
before an extraordinary charge in 1995 and excluding the effect of import duties
in both years.
"Results for 1996 were in line with our expectations," said Susan Engel,
President and CEO of Department 56. "During the year we took some tough, but
necessary steps to strengthen and protect our unique collectible brands by
responding to excess retail inventory levels. Although substantial efforts were
taken in 1996 to reduce inventory at retail, 1997 will continue to be a year of
transition, as retailers work to further reduce their inventory," she added.
As a result, dealer orders through February 15, 1997, are down 11% against the
comparable period last year. While orders for new product introductions continue
to be strong, first quarter reorders of existing products are down as dealer
inventory levels are sufficient for many items. Also, the company purposely
introduced fewer new Village pieces in January in order to balance the emphasis
at retail between new and existing pieces with the goal of advancing the
inventory reduction process. " We attribute the decline in orders to date
primarily to a necessary and healthy correction in retail inventory levels,"
Engel commented.
#more#
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In addition, Engel said, "independent research suggests continuing growth in
underlying consumer demand, as well as progress already made toward retail
inventory reduction, supporting our confidence in the future." Engel cited five
findings:
Retail sales of Department 56 collectible lines grew in 1996.
Dealers expect continued retail sales growth in 1997.
Dealers cite new collectors as an important reason for their growth.
Existing collectors continue to show enthusiasm for Department 56
collectible lines.
Dealers experienced a reduction in their retail inventory levels of current
product.
Department 56, Inc. is a leading designer, importer and distributor of fine
quality collectibles and other specialty giftware products sold through gift and
home accessory retailers. The Company is best known for its series of
collectible, handcrafted lit ceramic and porcelain houses, buildings and related
accessories in The Original Snow Village Collection and The Heritage Village
Collection. In addition, Department 56, Inc. offers an extensive line of holiday
and home decorative products, including its Snowbabies collectible porcelain and
pewter hand-painted figurines, Christmas decorative products and other giftware
items.
NOTE CONCERNING FORWARD-LOOKING STATEMENTS
The statements in this press release relating to matters that are not historical
facts are "forward-looking statements" that involve risks and uncertainties.
Among other assumptions, the forward-looking statements regarding retail
inventory levels and consumer demand are based on market research conducted for
the Company and assume that consumer demand and retail inventory levels will
follow the findings of, and dealer statements made in, this research. Moreover,
these forward-looking statements are also based on retail inventory reports from
certain dealers of the Company's products and assume that such reports were
correct when made and are reflective of the market as a whole. General and
giftware industry economic conditions are also assumed to remain stable.
Actual results may vary from these forward-looking statements and the
assumptions on which they are based. The forward-looking statements in this
press release speak as of this date only. The Company undertakes no obligation
to update such forward-looking statements or publish any forward-looking
statements in the future.
# Financial Tables Follow #
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DEPARTMENT 56, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
ASSETS
December 28, December 30,
1996 1995
------------ ------------
CURRENT ASSETS
Cash and cash equivalents $ 46,405 $ 7,805
Accounts receivable, net 35,603 34,271
Inventories 20,526 29,059
Other current assets 6,769 6,544
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Total current assets 109,303 77,679
PROPERTY AND EQUIPMENT, net 12,318 12,445
GOODWILL AND TRADEMARKS, net 163,618 168,195
OTHER ASSETS 494 766
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$ 285,733 $ 259,085
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 20,000 $ 20,000
Accounts payable 7,618 6,599
Other current liabilities 13,688 15,065
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Total current liabilities 41,306 41,664
DEFERRED TAXES 7,670 7,135
LONG-TERM DEBT 40,000 60,000
STOCKHOLDERS' EQUITY 196,757 150,286
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$ 285,733 $ 259,085
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DEPARTMENT 56, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Quarter Ended Year Ended
------------------------- -------------------------
December 28, December 30, December 28, December 30,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET SALES $ 34,292 $ 47,211 $ 228,775 $ 252,047
COST OF SALES 13,631 20,825 95,190 110,008
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Gross profit 20,661 26,386 133,585 142,039
Selling, general, and administrative expenses 12,122 13,910 48,306 47,889
Goodwill and trademark amortization 1,145 1,144 4,577 4,577
Recovery of import duties, net (1) - (53) (453) (2,872)
------------ ------------ ------------ ------------
OPERATING INCOME 7,394 11,385 81,155 92,445
Interest expense 1,473 2,338 6,063 9,582
Other income, net (276) (194) (648) (439)
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM 6,197 9,241 75,740 83,302
INCOME TAXES 1,979 3,742 29,796 33,737
------------ ------------ ------------ ------------
INCOME BEFORE EXTRAORDINARY ITEM 4,218 $ 5,499 $ 45,944 $ 49,565
EXTRAORDINARY CHARGE DUE TO
REFINANCING OF DEBT - - - 1,312
------------ ------------ ------------ ------------
NET INCOME (1) $ 4,218 $ 5,499 $ 45,944 $ 48,253
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
INCOME BEFORE EXTRAORDINARY
ITEM PER SHARE (1) $.19 $.25 $ 2.11 $ 2.28
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
NET INCOME PER SHARE (1) $.19 $.25 $ 2.11 $ 2.22
------------ ------------ ------------ ------------
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OPERATING CASH FLOW (2) $ 88,101 $ 99,070
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INCOME BEFORE EXTRAORDINARY ITEM &
RECOVERY OF IMPORT DUTIES AS A PERCENTAGE
OF SALES 20% 19%
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</TABLE>
(1) Net income for the quarter ended December 30, 1995, excluding the effect of
the $53 pretax recovery of import duties, was $5,467, or $.25 per share.
Income before extraordinary item for the year ended December 28, 1996,
excluding the effect of the $453 pretax recovery of import duties, was
$45,669 or $2.10 per share. Income before extraordinary item for the year
ended December 30, 1995, excluding the effect of the $2,872 pretax recovery
of import duties, was $47,856 or $2.20 per share.
(2) Earnings before interest, income taxes, depreciation and amortization
expenses.
