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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, 1998
Date of Earliest Event Reported: FEBRUARY 23, 1998
DEPARTMENT 56, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1-11908 13-3684956
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization File Number) 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 23, 1998, 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 23, 1998.
PAGE 2 OF 8
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, 1998
DEPARTMENT 56, INC.
/s/David H. Weiser
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David H. Weiser
Senior Vice President and Secretary
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Exhibit Index on Page 4
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EXHIBIT INDEX
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EXHIBIT NO. DESCRIPTION PAGE
<S> <C> <C>
99.1 Press Release, dated February 23, 1998 5
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Exhibit Index on Page 4
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[LOGO]
Investor Contacts: Mark Kennedy/Tim Schugel
Telephone: (612) 944-5600
DEPARTMENT 56 REPORTS 1997 EARNINGS
YEAR-TO-DATE ORDERS 8% HIGHER
February 23, 1998 - Eden Prairie, MN - Department 56, Inc. (NYSE: DFS) today
reported revenue and earnings for the fourth quarter and twelve months ended
January 3, 1998. For the quarter, revenue was $53.6 million, compared to $34.3
million in the prior year. Net income, excluding a gain on sale of an
aircraft, was $6.8 million or $0.34 per share, compared to $4.2 million or $0.19
per share in the prior year, assuming dilution.
For the year, revenue was $219.5 million, compared to $228.8 million in the
prior year. Net income, excluding the recovery of import duties and the gain
on the sale of an aircraft, was $40.8 million or $1.95 per share, compared to
$45.7 million or $2.10 per share in the prior year, assuming dilution.
"We are pleased with these results given the need at the beginning of the year
to further address retail inventories," said Susan Engel, Chairwoman and CEO of
Department 56. "Data collected from a broad spectrum of dealers indicated a
reduction in average retail inventory level in 1997, which was both significant
and more substantial than in 1996."
"Last year we said we believed the decline in orders represented a pause in
wholesale growth," said Engel. "Today's growth in wholesale orders confirms
that belief. "Dealer orders through February 14 were 8% higher than the
comparable period in the prior year. Year-to-date Village orders were 8% ahead
of the comparable period in the prior year, while year-to-date orders for
general giftware were tracking 5% ahead. At the end of the year, backlog stood
at $4.6 million compared to $7.2 million at the end of the prior year,
reflecting lower Easter orders.
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"This order pattern is consistent with dealer feedback indicating that retail
sales for our collectible products grew in 1997," said Engel. "Dealers cited
new collectors, continuing collector interest, and more marketing support as key
reasons for their growth. Dealers expect retail sales to increase again in
1998."
The company repurchased 1.1 million shares in the fourth quarter, completing the
1.5 million share repurchase authorization announced in December 1996, and using
0.7 million shares under the 1.5 million authorization announced in October
1997. The company repurchased a total of 2.2 million shares in 1997 at an
average price of $25 per share.
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.
NOTES CONCERNING FORWARD LOOKING STATEMENTS:
ANY CONCLUSIONS OR EXPECTATIONS DRAWN FROM THE STATEMENTS IN THIS PRESS RELEASE
CONCERNING MATTERS THAT ARE NOT HISTORICAL CORPORATE FINANCIAL RESULTS ARE
"FORWARD-LOOKING STATEMENTS" THAT INVOLVE RISKS AND UNCERTAINTIES. DEALER
ORDERS ARE PRINCIPALLY DEPENDENT ON THE AMOUNT, QUALITY AND MARKET ACCEPTANCE OF
THE NEW PRODUCT INTRODUCTIONS AND RETAILER DEMAND. DEALER ORDER PATTERNS HAVE
HISTORICALLY VARIED IN NUMBER, MIX AND TIMING, AND THERE CAN BE NO ASSURANCE
THAT THE ORDER TREND EXPERIENCE YEAR-TO-DATE WILL CONTINUE. MOREOVER, THE
STATEMENTS IN THIS PRESS RELEASE CONCERNING RETAIL INVENTORY LEVELS, CONSUMER
DEMAND, AND DEALER EXPECTATIONS ARE BASED ON STATISTICAL RESEARCH CONDUCTED BY
OR FOR THE COMPANY, AND ASSUME THAT SUCH FINDINGS ARE CORRECT AND REPRESENTATIVE
OF MARKET CONDITIONS AS A WHOLE.
OTHER FACTORS, INCLUDING PRODUCT DEVELOPMENT EFFORTS, COMPLETION OF THIRD PARTY
PRODUCT MANUFACTURING, DEALER REORDERS AND ORDER CANCELLATIONS, CONTROL OF
OPERATING EXPENSES, CORPORATE CASH FLOW APPLICATION, AND INDUSTRY, GENERAL
ECONOMIC, REGULATORY AND INTERNATIONAL TRADE CONDITIONS, CAN SIGNIFICANTLY
IMPACT THE COMPANY'S SALES AND EARNINGS. ACTUAL RESULTS MAY VARY MATERIALLY
FROM FORWARD-LOOKING STATEMENTS AND THE ASSUMPTIONS ON WHICH THEY ARE BASED.
THE COMPANY UNDERTAKES NO OBLIGATION TO UPDATE OR PUBLISH IN THE FUTURE ANY
FORWARD-LOOKING STATEMENTS.
# Financial Tables follow #
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DEPARTMENT 56, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
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ASSETS
January 3, December 28,
1998 1996
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<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 37,361 $ 46,405
Accounts receivable, net 23,004 35,603
Inventories 18,070 20,526
Other current assets 9,311 6,769
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Total current assets 87,746 109,303
PROPERTY AND EQUIPMENT, net 12,753 12,318
GOODWILL AND TRADEMARKS, net 159,042 163,618
OTHER ASSETS 154 494
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$ 259,695 $ 285,733
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 20,000 $ 20,000
Accounts payable 9,973 7,618
Other current liabilities 16,916 13,688
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Total current liabilities 46,889 41,306
DEFERRED TAXES 6,151 7,670
LONG-TERM DEBT 20,000 40,000
STOCKHOLDERS' EQUITY 186,655 196,757
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$ 259,695 $ 285,733
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DEPARTMENT 56, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
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<CAPTION>
Quarter Ended 53 Weeks 52 Weeks
------------------------- Ended Ended
January 3, December 28, January 3, December 28,
1998 1996 1998 1996
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<S> <C> <C> <C> <C>
NET SALES $ 53,601 $ 34,292 $ 219,496 $ 228,775
COST OF SALES 24,380 13,631 94,040 95,190
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Gross profit 29,221 20,661 125,456 133,585
Selling, general, and administrative expenses 15,574 12,122 50,142 48,306
Goodwill and trademark amortization 1,145 1,145 4,577 4,577
Recovery of import duties, net - - (370) (453)
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OPERATING INCOME 12,502 7,394 71,107 81,155
Interest expense 1,122 1,473 4,362 6,063
Gain on sale of aircraft (2,882) - (2,882) -
Other, net 73 (276) (1,086) (648)
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INCOME BEFORE INCOME TAXES 14,189 6,197 70,713 75,740
INCOME TAXES 5,605 1,979 27,932 29,796
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NET INCOME (1) $ 8,584 $ 4,218 $ 42,781 $ 45,944
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NET INCOME PER SHARE $ .43 $ .20 $ 2.06 $ 2.13
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NET INCOME PER SHARE ASSUMING DILUTION (1) $ .42 $ .19 $ 2.05 $ 2.11
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OPERATING CASH FLOW (2) $ 16,970 $ 9,263 $ 81,683 $ 88,101
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(1) Net income for the quarter ended January 3, 1998, excluding the effect of
the $2,882 pretax gain on sale of aircraft, was $6,841 or $.34 per share
assuming dilution. Net income for the year ended January 3, 1998,
excluding the effect of the $370 pretax recovery of import duties and the
$2,882 pretax gain on sale of aircraft, was $40,814 or $1.95 per share
assuming dilution. Net income 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 assuming dilution.
(2) Earnings before interest, income taxes, depreciation and amortization
expenses.
