<PAGE>
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: July 3, 1999
---------------------------
Commission file number: 1-11908
-----------------------------------
Department 56, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3684956
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Village Place, 6436 City West Parkway, Eden Prairie, MN 55344
------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(612) 944-5600
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------- -------
As of July 3, 1999, 17,364,442 shares of the registrant's common stock, par
value $.01 per share, were outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DEPARTMENT 56, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
ASSETS
JULY 3, JANUARY 2,
1999 1999
------------ --------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 3,515 $ 2,783
Accounts receivable, net 100,877 26,170
Inventories 26,035 18,287
Other current assets 13,565 10,661
------------ -------------
Total current assets 143,992 57,901
PROPERTY AND EQUIPMENT, net 22,204 17,722
GOODWILL, TRADEMARKS AND OTHER, net 155,528 157,531
DEFERRED FINANCING COSTS AND OTHER ASSETS 1,680 129
------------ -------------
$ 323,404 $ 233,283
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolving line of credit $ 79,000 $ -
Accounts payable 10,950 11,100
Other current liabilities 26,226 17,525
------------ -------------
Total current liabilities 116,176 28,625
DEFERRED TAXES 5,923 5,923
LONG-TERM DEBT 20,000 20,000
STOCKHOLDERS' EQUITY 181,305 178,735
------------ -------------
$ 323,404 $ 233,283
============ =============
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE>
DEPARTMENT 56, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
QUARTER QUARTER
ENDED ENDED
JULY 3, JULY 4,
1999 1998
------------ -----------
<S> <C> <C>
NET SALES $ 82,721 $ 69,920
COST OF SALES 33,478 28,710
------------ -----------
Gross profit 49,243 41,210
OPERATING EXPENSES:
Selling, general, and administrative 16,463 13,605
Amortization of goodwill, trademarks and other 1,270 1,258
------------ -----------
Total operating expenses 17,733 14,863
------------ -----------
INCOME FROM OPERATIONS 31,510 26,347
OTHER EXPENSE (INCOME):
Interest expense 1,397 970
Other, net (109) (26)
------------ -----------
INCOME BEFORE INCOME TAXES 30,222 25,403
PROVISION FOR INCOME TAXES 11,484 10,034
------------ -----------
NET INCOME $ 18,738 $ 15,369
============ ===========
NET INCOME PER COMMON SHARE $ 1.06 $ 0.81
============ ===========
NET INCOME PER COMMON SHARE
ASSUMING DILUTION $ 1.04 $ 0.80
============ ===========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
DEPARTMENT 56, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
26 WEEKS 26 WEEKS
ENDED ENDED
JULY 3, JULY 4,
1999 1998
------------- ------------
<S> <C> <C>
NET SALES $ 116,369 $ 118,947
COST OF SALES 47,230 49,304
------------ ------------
Gross profit 69,139 69,643
OPERATING EXPENSES:
Selling, general, and administrative 28,951 25,234
Amortization of goodwill, trademarks and other 2,533 2,410
------------ ------------
Total operating expenses 31,484 27,644
------------ ------------
INCOME FROM OPERATIONS 37,655 41,999
OTHER EXPENSE (INCOME):
Interest expense 1,913 1,741
Other, net 126 (418)
------------ ------------
INCOME BEFORE INCOME TAXES 35,616 40,676
PROVISION FOR INCOME TAXES 13,534 16,067
------------ ------------
NET INCOME $ 22,082 $ 24,609
============ ============
NET INCOME PER COMMON SHARE $ 1.24 $ 1.28
============ ============
NET INCOME PER COMMON SHARE
ASSUMING DILUTION $ 1.22 $ 1.26
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
DEPARTMENT 56, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
26 WEEKS 26 WEEKS
ENDED ENDED
JULY 3, JULY 4,
1999 1998
--------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES -
Net cash used in operating activities $ (51,353) $ (34,010)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (6,453) (1,299)
Acquisitions (630) (4,660)
------------- -------------
Net cash used in investing activities (7,083) (5,959)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options 1,109 2,530
Net borrowings under revolving credit facility 79,000 37,000
Stock repurchases (20,941) (35,430)
------------- -------------
Net cash provided by financing activities 59,168 4,100
------------- -------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 732 (35,869)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 2,783 37,361
------------- -------------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 3,515 $ 1,492
============= =============
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION -
Cash paid for:
Interest $ 3,030 $ 1,586
Income taxes $ 5,655 $ 12,433
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
DEPARTMENT 56, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying condensed consolidated balance sheet as of January 2, 1999
was derived from the audited consolidated balances as of that date. The
remaining accompanying condensed consolidated financial statements are unaudited
and, in the opinion of management, include all adjustments necessary for a fair
presentation. Such adjustments were of a normal recurring nature.
The results of operations for the quarter ended July 3, 1999 and the 26
weeks ended July 3, 1999 are not necessarily indicative of the results for the
full fiscal year.
It is suggested that these financial statements be read in conjunction with
the consolidated financial statements and notes thereto included in the 1998
Annual Report to Stockholders and Annual Report on Form 10-K filed by Department
56, Inc. (the "Company") with the Securities and Exchange Commission.
2. INCOME PER COMMON SHARE
Net income per common share is calculated by dividing net income by the
weighted average number of shares outstanding during the period. Net income per
common share assuming dilution reflects per share amounts that would have
resulted had the Company's outstanding stock options been converted to common
stock.
3. STOCKHOLDERS' EQUITY
On May 10, 1999, the Board of Directors of the Company authorized a stock
repurchase program providing for the repurchase in open market and privately
negotiated transactions of up to an additional 3.0 million shares valid through
the end of the Company's 2000 fiscal year. During the quarter ended July 3,
1999, the Company repurchased 617,300 shares at a cost of $17.9 million under
its existing stock repurchase program. During the 26 weeks ended July 3, 1999,
the Company repurchased 717,300 shares at a cost of $20.9 million. Since
January 1997, the Company has repurchased a total of 4.6 million shares at an
average price of $29 per share. As of July 3, 1999, the Company was authorized
to repurchase 2.9 million additional shares under these programs through the end
of 2000. The timing and number of shares repurchased under these programs will
be determined at the discretion of the Company's management and subject to
continued compliance with the Company's credit facilities.
4. ACQUISITIONS
During May 1999, the Company acquired substantially all of the assets of
the independent sales representative organization that represented the Company's
products in Massachusetts and several other eastern states.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
COMPARISON OF RESULTS OF OPERATIONS FOR THE QUARTER ENDED JULY 3, 1999 TO THE
QUARTER ENDED JULY 4, 1998.
<TABLE>
<CAPTION>
Quarter Quarter
Ended Ended
July 3, 1999 July 4, 1998
----------------------- ----------------------
(Dollars in millions)
% of % of
Dollars Net Sales Dollars Net Sales
-------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Net sales $ 82.7 100 % $ 69.9 100 %
Gross profit 49.2 60 41.2 59
Selling, general, and administrative expenses 16.5 20 13.6 20
Amortization of goodwill, trademarks and other 1.3 2 1.3 2
Income from operations 31.5 38 26.3 38
Interest expense 1.4 2 1.0 1
Other expense (income), net (0.1) - - -
Income before income taxes 30.2 37 25.4 36
Provision for income taxes 11.5 14 10.0 14
Net income 18.7 23 15.4 22
</TABLE>
NET SALES. Net sales increased $12.8 million, or 18%, from $69.9
million in the second quarter of 1998 to $82.7 million in the second quarter of
1999. The increase in sales was principally due to an increase in volume due in
part to shipments originally scheduled for the first quarter not being shipped
until the second quarter because of earlier difficulties faced in the
implementation of the Company's new integrated computer system. Sales of the
Company's Village Series products increased $10.8 million, or 23%, while sales
of General Giftware products increased $2.0 million, or 9% between the two
periods. Village Series and General Giftware products represented 71% and 29%,
respectively, of the Company's net sales during the second quarter of 1999.
7
<PAGE>
GROSS PROFIT. Gross profit increased $8.0 million, or 19%, between the
second quarter of 1998 and the second quarter of 1999. The increase in gross
profit was principally due to the increase in sales volume. Gross profit as a
percentage of net sales increased from 59% in the second quarter of 1998 to
approximately 60% in the second quarter of 1999, principally due to a change in
the mix of product shipped during the second quarter of 1999 as compared to the
second quarter of 1998.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $2.9 million, or 21%, between the second
quarter of 1998 and the second quarter of 1999. The increase is principally due
to an increase in commission and distribution expenses due to the increase in
sales, expenses associated with operation of the Company's first retail store
opened in May 1999, and an increase in depreciation expense associated with the
Company's implementation of its new integrated computer system. Selling,
general and administrative expenses as a percentage of sales was approximately
20% in the second quarter of both 1998 and 1999.
INCOME FROM OPERATIONS. Income from operations increased $5.2 million, or
20%, between the second quarter of 1998 and the second quarter of 1999 due to
the factors described above. Income from operations was 38% of net sales in the
second quarter of both 1998 and 1999.
INTEREST EXPENSE. Interest expense increased $0.4 million, or 44%, between
the second quarter of 1998 and the second quarter of 1999 principally due to
increased borrowings under the revolving line of credit in 1999, offset by the
payment of $20 million of long term debt during 1998.
PROVISION FOR INCOME TAXES. The effective tax rate was 39.5% during the
second quarter of 1998 and 38% during the second quarter of 1999.
8
<PAGE>
RESULTS OF OPERATIONS
COMPARISON OF RESULTS OF OPERATIONS FOR THE 26 WEEKS ENDED JULY 3, 1999 TO THE
26 WEEKS ENDED JULY 4, 1998.
<TABLE>
<CAPTION>
26 Weeks 26 Weeks
Ended Ended
July 3, 1999 July 4, 1998
----------------------- ----------------------
(Dollars in millions)
% of % of
Dollars Net Sales Dollars Net Sales
--------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $ 116.4 100 % $ 118.9 100 %
Gross profit 69.1 59 69.6 59
Selling, general, and administrative expenses 28.9 25 25.2 21
Amortization of goodwill, trademarks and other 2.5 2 2.4 2
Income from operations 37.7 32 42.0 35
Interest expense 1.9 2 1.7 2
Other expense (income), net 0.1 - (0.4) -
Income before income taxes 35.6 31 40.7 34
Provision for income taxes 13.5 12 16.1 14
Net income 22.1 19 24.6 21
</TABLE>
NET SALES. Net sales decreased $2.5 million, or 2%, from $118.9
million in 1998 to $116.4 million in 1999. The decrease in sales was
principally due to delays experienced during the first quarter of 1999 from the
implementation of the Company's new integrated computer system. Sales of the
Company's Village Series products increased $1.9 million, or 2%, while sales of
General Giftware products decreased $4.4 million, or 11% between the two
periods. Village Series and General Giftware products represented 70% and 30%,
respectively, of the Company's net sales in 1999.
GROSS PROFIT. Gross profit decreased $0.5 million, or 1%, between 1998 and
1999. The decrease in gross profit was principally due to the decrease in sales
volume. Gross profit as a percentage of net sales was 59% in both 1998 and
1999.
9
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $3.7 million, or 15%, between 1998 and 1999.
The increase is principally due to an increase in showroom expenses as a result
of the Company's acquisition of showrooms during 1998 and 1999, expenses
associated with operation of the Company's first retail store, an increase in
depreciation expense associated with the Company's implementation of its new
integrated computer system, an increase in marketing expense, and an increase in
distribution expense. Selling, general and administrative expenses as a
percentage of sales increased from approximately 21% in 1998 to 25% in 1999.
INCOME FROM OPERATIONS. Income from operations decreased $4.3 million, or
10%, between 1998 and 1999 due to the factors described above. Income from
operations was 35% and 32% of net sales in 1998 and 1999, respectively.
INTEREST EXPENSE. Interest expense increased $0.2 million, or 10%,
between 1998 and 1999 principally due to increased borrowings under the
revolving line of credit in 1999 offset by the payment of $20 million of long
term debt during 1998.
PROVISION FOR INCOME TAXES. The effective tax rate was 39.5% during the
26 weeks ended July 4, 1998 and 38% during the 26 weeks ended July 3, 1999.
LIQUIDITY AND CAPITAL RESOURCES
In March 1999, the Company entered into a new credit agreement providing a
$100 million revolving credit facility and a $150 million revolver/term loan.
The $150 million revolver/term loan converts to a four-year term loan after one
year. The revolver/term loan will have annual amortization payments of 15%,
20%, 25% and 40% of the amount outstanding at conversion in March 2001, 2002,
2003, and 2004, respectively.
The Company used the proceeds of the revolver/term loan to refinance the
remaining $20 million term loan under its former credit agreement. In
connection therewith, the Company recorded $1.7 million in deferred financing
fees, which is being amortized over the life of the credit agreement.
The revolving credit facility provides for borrowings of up to $100 million
including letters of credit. The letters of credit are issued primarily in
connection with inventory purchases. The credit agreement contains financial and
operating covenants, including restrictions on incurring indebtedness and liens,
selling property and paying dividends. In addition, the Company is required to
satisfy consolidated net worth, interest coverage ratio and leverage ratio
tests, in each case at the end of each fiscal quarter.
The Company believes that its internally generated cash flow and seasonal
borrowings under the revolving credit facility and revolver/term loan will be
adequate to fund operations and capital expenditures for the next twelve months.
Consistent with customary practice in the giftware industry, the Company
offers extended accounts receivable terms to many of its customers. This
practice has typically created significant
10
<PAGE>
working capital requirements in the second and third quarters which the
Company has generally financed with available cash, internally generated cash
flow and seasonal borrowings. The Company's cash and cash equivalents
balances peak in December, following the collection in November and December
of accounts receivable with extended payment terms. The Company's bad debt
experience relating to these accounts receivable has not been material.
Accounts receivable increased from $83.5 million at July 4, 1998 to $100.9
million at July 3, 1999. The increase in accounts receivable was principally
due to lower cash collections due to the timing of invoices and statements
mailed to customers as a result of the implementation of the new integrated
computer system.
In April 1999, the Company executed a lease for a new distribution center
in Minnesota. By the end of 1999, the Company plans to consolidate its three
current distribution centers into the new distribution center. The lease
provides for a 10-year term, with options to renew the lease, as well as to
expand and/or acquire the facility, and requires minimum future annual rentals
that approximate the combined annual rentals of the three existing distribution
centers.
Other current liabilities increased from $21.0 million at July 4, 1998 to
$26.2 million at July 3, 1999. The $5.2 million increase is primarily due to
the timing of federal income tax payments.
On May 10, 1999, the Board of Directors of the Company authorized a stock
repurchase program providing for the repurchase in open market and privately
negotiated transactions of up to an additional 3.0 million shares valid through
the end of the Company's 2000 fiscal year. During the quarter ended July 3,
1999, the Company repurchased 617,300 shares at a cost of $17.9 million
primarily under its existing stock repurchase program. During the 26 weeks
ended July 3, 1999, the Company repurchased 717,300 shares at a cost of $20.9
million. Since January 1997, the Company has repurchased a total of 4.6 million
shares at an average price of $29 per share. As of July 3, 1999, the Company
was authorized to repurchase 2.9 million additional shares under these programs
through the end of 2000. The timing and number of shares repurchased under
these programs will be determined at the discretion of the Company's management
and subject to continued compliance with the Company's credit facilities.
YEAR 2000
On January 3, 1999, the Company substantially implemented a new integrated
computer system, which replaced its primary operating and financial computing
systems. The vendor of the core software program for the new integrated system
has indicated that this system will substantially address Year 2000
requirements, and the Company does not anticipate that it will experience any
material disruption to its transaction processing operations or financial or
accounting functions as a result of the failure of any of its systems to be Year
2000 compliant. The Company is continuing to monitor and evaluate its new and
existing systems so that, in the event substantial non-compliance with Year 2000
needs is detected, the remainder of 1999 can be utilized to achieve necessary
functionality.
Total expenditures (aside of internal labor costs) for implementation of
the new system is expected to be approximately $9.5 million. Approximately $6.7
million of the systems
11
<PAGE>
expenditures have been incurred as of July 3, 1999. Hardware, software and
certain project costs were capitalized and will be amortized over their
useful lives. All other costs were expensed as incurred.
The Company believes that the implementation of the new integrated
computer system will allow it to be substantially Year 2000 compliant. There
can be no assurance, however, that the systems of third parties on which the
Company relies will be Year 2000 compliant in a timely manner. Given the Year
2000 certification of the Company's main operating system, the Company's
approach to addressing any noncompliance that may arise in that system is to
analyze and rectify, through programming on an as detected, as needed basis.
Additional alternatives available in a non-compliance contingency include the
use of electronic spreadsheets, resetting system dates and manual
workarounds. An interruption of the Company's ability to conduct its
business due to a Year 2000 problem with a third party could have a material
adverse effect on the Company. The Company's product vendor and customer
bases are fragmented, and generally are not dependent on computer control or
systematization of their business operations. Management, therefore,
believes that the greatest risks presented by potential Year 2000 failures of
third parties are those which would affect the general economy or certain
industries, such as may occur if there were insufficient electric power or
other utilities needed for the Company's operations or manufacture of its
products or insufficient reliable means of transporting the Company's
products. While such failures could affect important operations of the
Company, either directly or indirectly, in a significant manner, the Company
cannot at present estimate either the likelihood or the potential cost of
such failures. The statements concerning future matters are "forward-looking
statements" and actual results may vary.
FOREIGN EXCHANGE
The dollar value of the Company's assets abroad is not significant.
Substantially all of the Company's sales are denominated in United States
dollars and, as a result, are not subject to changes in exchange rates.
The Company imports most of its products from manufacturers located in the
Pacific Rim, primarily China, Taiwan (Republic of China) and The Philippines.
These transactions are principally denominated in U.S. dollars, except for
imports from Taiwan which are principally denominated in New Taiwan dollars.
The Company, from time to time, will enter into foreign exchange contracts or
build foreign currency deposits as a partial hedge against currency
fluctuations. The Company intends to manage foreign exchange risks to the extent
possible and take appropriate action where warranted. The Company's costs could
be adversely affected if the currencies of the countries in which the
manufacturers operate appreciate significantly relative to the U.S. dollar.
EFFECT OF INFLATION
The Company continually attempts to minimize any effect of inflation on
earnings by controlling its operating costs and selling prices. During the past
few years, the rate of inflation has not had a material impact on the Company's
results of operations.
12
<PAGE>
SEASONALITY AND CUSTOMER ORDERS
The Company generally records its highest level of sales during the second
and third quarters as retailers stock merchandise in anticipation of the holiday
season. The Company can also experience fluctuations in quarterly sales and
related net income compared with the prior year due to timing of receipt of
product from suppliers and subsequent shipment of product from the Company to
customers.
CUSTOMER ORDERS ENTERED (1)
(IN MILLIONS)
<TABLE>
<CAPTION>
1st 2nd 3rd 4th
Qtr Qtr Qtr Qtr Total
------- -------- ------ ------ --------
<S> <C> <C> <C> <C> <C>
1997 $ 161 $ 44 $ 34 $ 6 $ 245
1998 174 50 37 8 269
1999 182 (2) 48 - - -
</TABLE>
(1) Customer orders entered are orders received and approved by the
Company, subject to cancellation for various reasons, including credit
considerations, inventory shortages and customer requests.
(2) Customer orders entered for the first quarter of 1999 have been
adjusted from previously reported first quarter 1999 customer orders entered,
consistent with the Company's press release dated June 9, 1999.
Historically, principally due to the timing of trade shows early in the
calendar year and the limited supply of the Company's products, the Company has
received the majority of its orders in the first quarter of each year. The
Company entered 65% and 66% of its total annual customer orders during the first
quarter of both 1998 and 1997, respectively. Cancellations were approximately
7% and 8% of total annual orders in 1998 and 1997, respectively.
The Company shipped and recorded as net sales approximately 91% and 90% of
its annual customer orders in 1998 and 1997, respectively. Orders not shipped
in a particular period, net of cancellations, returns, allowances and cash
discounts, are carried into backlog. The backlog was $107.1 million as of July
3, 1999, as compared to $101.3 million as of July 4, 1998.
Through the second quarter of 1999, customer orders entered increased 3% as
compared to the same period for 1998. Customer orders entered for Village
Series products have increased 6% through the second quarter of 1999 while
customer orders entered for General Giftware products have decreased 4%.
Through the first quarter of 1999, adjusted customer orders entered
increased 5% as compared to the same period for 1998. Adjusted customer
orders entered for Village Series products increased 5% through the first
quarter of 1999 while adjusted customer orders entered for General Giftware
products increased 4%.
Certain General Giftware products have lower gross profit rates than the
Company's average gross profit rate. In addition, from time to time, the
Company liquidates product at lower than average gross profit rates. As a
result, gross profit may vary depending on the mix of product shipped.
13
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
At the Company's Annual Meeting of Stockholders held on May 10, 1999 (the
"Annual Meeting"), all of the persons named in the Company's proxy materials as
management nominees for the Board of Directors were elected. All of the
nominees were incumbent directors and the election of all nominees at the Annual
Meeting was uncontested. Also at the Annual Meeting, the Company's stockholders
ratified the appointment by the Board of Directors of Deloitte & Touche LLP,
independent public accountants, as auditors for the Company for the fiscal year
ending January 1, 2000 as follows: 15,961,339 voting for ratification; 10,686
voting against; 5,913 abstentions; 1,994,707 not voting.
NOTES CONCERNING FORWARD LOOKING STATEMENTS:
ANY CONCLUSIONS OR EXPECTATIONS EXPRESSED IN, OR DRAWN FROM, THE STATEMENTS IN
THIS FILING CONCERNING MATTERS THAT ARE NOT HISTORICAL CORPORATE FINANCIAL
RESULTS ARE "FORWARD-LOOKING STATEMENTS" THAT INVOLVE RISKS AND UNCERTAINTIES.
THE COMPANY'S CAPITAL EXPENDITURES FORECAST RELATED TO THE IMPLEMENTATION OF THE
NEW INTEGRATED COMPUTER SYSTEM IS BASED ON THE COMPANY'S CURRENT EXPECTATIONS
REGARDING THE TIMING AND EFFICIENCY OF ACHIEVING FULL FUNCTIONALITY IN
INFORMATION SYSTEMS DEVELOPED TO COLLECT, COMPILE AND EXECUTE CUSTOMER ORDERS,
AND THE COST OF EXTERNAL CONTRACTOR SERVICES RELATING THERETO. IF NOT MENTIONED
ABOVE, OTHER FACTORS (INCLUDING: IDENTIFICATION, COMPLETION AND RESULTS OF
ACQUISITIONS, INVESTMENTS, AND OTHER STRATEGIC BUSINESS INITIATIVES; AND
INDUSTRY AND GENERAL ECONOMIC CONDITIONS) CAN SIGNIFICANTLY IMPACT THE COMPANY'S
CAPITAL EXPENDITURES. 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.
14
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following documents are filed as exhibits to this Report.
11.1 Computation of net income per share.
11.2 Company press release dated June 9, 1999.
11.3 Company press release dated July 27, 1999.
27.1 Financial data schedule (EDGAR filing only).
(b) Reports on Form 8-K.
None.
15
<PAGE>
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 thereunto duly authorized.
DEPARTMENT 56, INC.
Date: August 17, 1999 /s/ Susan E. Engel
-----------------------------------------
Susan E. Engel
Chairwoman, Chief Executive Officer and
Director
Date: August 17, 1999 /s/ Gregg A. Peters
-----------------------------------------
Gregg A. Peters
Director of Finance and Principal
Accounting Officer
16
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT EXHIBIT PAGE
NUMBER NAME NUMBER
- ------ -------- --------
<S> <C> <C>
11.1 Computation of net income per share.
11.2 Company press release dated June 9, 1999.
11.3 Company press release dated July 27, 1999.
27.1 Financial data schedule (EDGAR filing only).
</TABLE>
17
<PAGE>
Exhibit 11.1
DEPARTMENT 56, INC.
COMPUTATION OF NET INCOME PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Quarter Quarter
Ended Ended
July 3, July 4,
1999 1998
----------- ------------
<S> <C> <C>
BASIC:
Net Income $ 18,738 $ 15,369
=========== ===========
Weighted average number of common shares outstanding 17,710 18,962
Net Income per Common Share $ 1.06 $ 0.81
=========== ===========
ASSUMING DILUTION:
Net Income $ 18,738 $ 15,369
=========== ===========
Weighted average number of common shares outstanding 17,710 18,962
The number of shares resulting from the assumed
exercise of stock options reduced by the number
of shares which could have been purchased with
the proceeds from such exercise, using the average
market price during the period 239 336
----------- -----------
Weighted average number of common and
common equivalent shares 17,949 19,298
=========== ===========
Net Income per Common Share Assuming Dilution $ 1.04 $ 0.80
=========== ===========
</TABLE>
18
<PAGE>
Exhibit 11.1
DEPARTMENT 56, INC.
COMPUTATION OF NET INCOME PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
26 Weeks 26 Weeks
Ended Ended
July 3, July 4,
1999 1998
----------- -----------
<S> <C> <C>
BASIC:
Net Income $ 22,082 $ 24,609
=========== ===========
Weighted average number of common shares outstanding 17,874 19,186
Net Income per Common Share $ 1.24 $ 1.28
=========== ===========
ASSUMING DILUTION:
Net Income $ 22,082 $ 24,609
=========== ===========
Weighted average number of common shares outstanding 17,874 19,186
The number of shares resulting from the assumed
exercise of stock options reduced by the number
of shares which could have been purchased with
the proceeds from such exercise, using the average
market price during the period 244 311
----------- -----------
Weighted average number of common and
common equivalent shares 18,118 19,497
=========== ===========
Net Income per Common Share Assuming Dilution $ 1.22 $ 1.26
=========== ===========
</TABLE>
19
<PAGE>
[LOGO]
Investor Contacts: Mark Kennedy/Tony Ishaug
Telephone: (612) 944-5600
SYSTEM IMPLEMENTATION DIFFICULTIES EXPECTED TO IMPACT 1999 RESULTS
- - -
OPTIMISTIC ABOUT ACHIEVING THREE-YEAR AVERAGE MID-TEENS EPS GROWTH GOAL
June 9, 1999 - Eden Prairie, MN - Department 56 (NYSE: DFS) today announced
that system implementation difficulties are expected to impact the Company's
1999 results. This expectation is largely based on year-to-date order totals
that reflect recent adjustments to first quarter orders and order-taking
difficulties, both caused by the implementation of the Company's new
enterprise-wide system. Despite system difficulties, year-to-date orders for
the Company's core collectible products remain solid. The change in order
expectations is concentrated in the company's general giftware lines. Due to
the nature of market demand for non-collectible merchandise, the Company is
optimistic that its traditionally highly desirable general giftware products
can generate demand in line with historic levels in future years.
As of June 5, 1999, total year-to-date orders were up three percent over the
same period in 1998. The Company's core-business Village orders were up six
percent, and reflecting the above-stated systems impact, the Company's non-core
general giftware product orders were down four percent versus the same period in
1998. Any future improvement in the order growth for all of 1999 will be
dependent primarily upon customer demand for the Company's mid-year new product
introductions and, to a lesser degree, for previously introduced merchandise.
The Company is not likely to achieve its previously stated goals for 1999 of
seven to nine percent sales and mid-teens earnings per share growth.
Susan Engel, Chairwoman and Chief Executive Officer said, "We are disappointed
that the systems implementation has impacted our 1999 orders. Progress continues
with the systems implementation, and we are confident that the long-term
benefits of the new system will outweigh the current year's implementation
difficulties."
Ms Engel added, "We continue to invest in our business. Our new Seasons Bay and
Monopoly lines, both introduced this year, represent our first two collectible
line introductions in five years. Combined with the exciting new hand-painted
interior scenes in our new Village gift sets, this represents a banner year for
product development. This accelerated introduction of new products, combined
with continued solid demand for our collectibles and our belief that orders for
our non-collectible products could return to historic growth levels
<PAGE>
makes us optimistic that we will achieve our previously stated goal of three
year average mid-teens earning per share growth."
Sales through June 8, 1999 totaled $89 million, compared to $92 million in the
same period in 1998. "After a slow start to shipping in the first quarter due
to the new system's implementation, we continue to catch up and should exceed
last year sales either by the end of this quarter or early in the third
quarter," said Ms. Engel.
Since the beginning of the second quarter, the company has repurchased 440,000
shares of its common stock at an average price of $30 per share. Current stock
repurchase authorizations permit the future buyback of approximately three
million shares.
Department 56, Inc. is a leading collectibles and giftware company known for its
lighted Villages, Snowbabies-TM- figurines and extensive lines of holiday and
home decorative products. Its products are sold primarily through gift,
specialty and department store retailers in the United States, Canada and
Europe. Department 56 seeks to expand its market presence through creative
product development and marketing, as well as through acquisitions.
NOTES CONCERNING FORWARD LOOKING STATEMENTS:
ANY CONCLUSIONS OR EXPECTATIONS EXPRESSED IN, OR 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. THE GOAL OF MID-TEENS THREE YEAR AVERAGE ANNUAL EARNINGS PER
SHARE GROWTH REFERRED TO IN THIS RELEASE IS THAT STATED IN THE COMPANY'S
CURRENT REPORT ON FORM 8-K, DATED APRIL 30, 1998. THE COMPANY'S CURRENT
OPTIMISM IN ITS ABILITY TO ACHIEVE THAT GOAL IS BASED UPON, AND SUBJECT TO,
THE FACTORS SET FORTH THEREIN AND BELOW, AS WELL AS THE ASSUMPTIONS THAT
DEMAND FOR THE COMPANY'S COLLECTIBLE PRODUCTS CONTINUES AT OR EXCEEDING THE
LEVELS REPORTED YEAR-TO-DATE, AND THAT SUCH DEMAND, TOGETHER WITH THE
COMPLETION OF AN EFFICIENT SYSTEMS IMPLEMENTATION, WILL ENCOURAGE DEALERS TO
ORDER THE COMPANY'S NON-COLLECTIBLE MERCHANDISE AT LEVELS EQUAL TO OR GREATER
THAN 1998.
THE COMPANY'S SALES EXPECTATIONS ARE BASED ON THE COMPANY'S CURRENT FORECAST OF
DEALER ORDERS AND PLANNED SALES AT ITS RETAIL STORE IT OPENED IN MAY, 1999, AND
IS FURTHER DEPENDENT ON THE TIMING AND EXTENT OF PROMOTIONAL AND MARKETING
EFFORTS UNDERTAKEN BY THE COMPANY AS WELL AS THE TIMING AND EXTENT OF PRODUCT
RECEIPTS AND SHIPMENTS, THE EFFICIENCY OF INFORMATION SYSTEMS DEVELOPED TO
COLLECT, COMPILE AND EXECUTE CUSTOMER ORDERS, AND RETAILER AND CONSUMER DEMAND.
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 YEAR-TO-DATE ORDER TREND EXPERIENCE WILL CONTINUE. MOREOVER,
THE COMPANY'S ORDER FORECASTING MODEL IS DEPENDENT ON ASSUMPTIONS CONCERNING
RETAIL INVENTORY LEVELS, CONSUMER DEMAND, AND DEALER EXPECTATIONS WHICH ARE
BASED ON STATISTICAL RESEARCH CONDUCTED FOR THE COMPANY THAT IS ASSUMED CORRECT
AND REPRESENTATIVE OF MARKET CONDITIONS AS A WHOLE. THE COMPANY'S EXPECTATIONS
REGARDING EARNINGS PER SHARE ARE BASED ON THE COMPANY'S SALES EXPECTATIONS AND
ASSUMES IT WILL MAINTAIN ITS HISTORICAL OPERATING MARGIN. THE COMPANY'S
OPERATING MARGIN MAY BE IMPACTED BY, AMONGST OTHER FACTORS, SHIFTS IN PRODUCT
MIX, EXCHANGE RATE FLUCTUATIONS WITH COUNTRIES THE COMPANY IMPORTS FROM, CHANGES
IN FREIGHT RATES AND CHANGES IN THE COMPANY'S HISTORICAL SELLING, GENERAL AND
ADMINISTRATIVE EXPENSE RATE.
IF NOT MENTIONED ABOVE, OTHER FACTORS, INCLUDING CONSUMER ACCEPTANCE OF NEW
PRODUCTS; PRODUCT DEVELOPMENT EFFORTS; IDENTIFICATION AND RETENTION OF SCULPTING
AND OTHER TALENT; COMPLETION OF THIRD PARTY PRODUCT MANUFACTURING; DEALER
REORDERS AND ORDER CANCELLATIONS; CONTROL OF OPERATING EXPENSES; CORPORATE CASH
FLOW APPLICATION, INCLUDING SHARE REPURCHASES; FUNCTIONALITY OF INFORMATION,
OPERATING AND DISTRIBUTION SYSTEMS; IDENTIFICATION, COMPLETION AND RESULTS OF
ACQUISITIONS, INVESTMENTS, AND OTHER STRATEGIC BUSINESS INITIATIVES; GRANTS OF
STOCK OPTIONS OR OTHER EQUITY EQUIVALENTS; ACTUAL OR DEEMED EXERCISES OF STOCK
OPTIONS; AND INDUSTRY, GENERAL ECONOMIC, REGULATORY, TRANSPORTATION, AND
INTERNATIONAL TRADE AND MONETARY CONDITIONS, CAN SIGNIFICANTLY IMPACT THE
COMPANY'S SALES, EARNINGS AND EARNINGS PER SHARE. 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.
<PAGE>
[LOGO]
Investor Contacts: Mark Kennedy/Tony Ishaug
Telephone: (612) 944-5600
DEPARTMENT 56 ANNOUNCES QUARTERLY RESULTS
July 27, 1999 - Eden Prairie, MN - Department 56 (NYSE: DFS) today reported
increased orders and strong sales and earnings for the second quarter ended July
3, 1999.
Through the second quarter of 1999, customer orders increased three percent to
$230 million compared to $224 million for the same period of 1998. Customer
orders for Village Series products increased six percent through the second
quarter of 1999 while customer orders entered for General Giftware products
decreased four percent.
Earnings for the quarter reached a record level $18.7 million, or $1.04 per
share assuming dilution, compared to $15.4 million or $0.80 in the prior year's
second quarter. Revenues for the quarter were $82.7 million or 18% higher than
the $69.9 million reported in the comparable quarter of 1998. The strength of
the quarterly results was due in part to shipments originally scheduled for the
first quarter not being shipped until the second quarter because of earlier
difficulties faced in the implementation of the company's new enterprise-wide
computer systems.
Earnings for the first half of the year were $22.1 million or $1.22 per share
assuming dilution, compared to $24.6 million or $1.26 per share in the prior
year. Revenues for the year's first half were $116.4 million compared to $118.9
million in the first half of 1998.
Sales for the year-to-date period ended July 27, 1999 were three percent higher
than sales through the comparable period ended July 27, 1998.
In making the announcement, Susan Engel, Chairwoman and Chief Executive Officer,
said "We are encouraged by the strong demand for our core Village product
including our new Seasons Bay and Monopoly lines, the company's first new
continuity gift lines in five years. Looking to the balance of the year, we
expect full year 1999 sales and earnings per share to be higher than a year
ago."
Ms. Engel also noted that as part of the company's share repurchase program,
during the quarter, Department 56 purchased 617,000 shares of stock in the open
market at an average price of $29 per share. Since the end of the quarter
through July 27, the Company purchased an additional 301,000 shares of stock at
an average price of $27 per share, bringing the total number of shares
repurchased year-to-date to 1.0 million shares. The Company
<PAGE>
has remaining authorization from the Board of Directors to repurchase 2.6
million additional shares. As of July 3, 1999, the Company had 17.4 million
shares outstanding.
Mark Kennedy, the company's Chief Financial Officer since April 1995, has
recently formed a committee to run for the U.S. House of Representatives in
Minnesota's 2nd Congressional District. He will continue to work for the
company through the end of the year and will be available as a consultant next
year. A search for a Chief Financial Officer is now underway to allow for a
smooth transition.
Department 56, Inc. is a leading collectibles and giftware company known for its
lighted Villages, Snowbabies-TM- figurines and extensive lines of holiday and
home decorative products. Its products are sold primarily through gift,
specialty and department store retailers in the United States, Canada and
Europe. Department 56 seeks to expand its market presence through creative
product development and marketing, as well as through acquisitions.
NOTES CONCERNING FORWARD LOOKING STATEMENTS:
ANY CONCLUSIONS OR EXPECTATIONS EXPRESSED IN, OR 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. THE COMPANY'S SALES EXPECTATIONS FOR 1999 ARE BASED ON THE
COMPANY'S CURRENT FORECAST OF DEALER ORDERS AND PLANNED SALES AT ITS RETAIL
STORE IT OPENED IN MAY, 1999, AND IS FURTHER DEPENDENT ON THE TIMING AND EXTENT
OF PROMOTIONAL AND MARKETING EFFORTS UNDERTAKEN BY THE COMPANY AS WELL AS THE
TIMING AND EXTENT OF PRODUCT RECEIPTS AND SHIPMENTS, THE EFFICIENCY OF
INFORMATION SYSTEMS DEVELOPED TO COLLECT, COMPILE AND EXECUTE CUSTOMER ORDERS,
AND RETAILER AND CONSUMER DEMAND. 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 YEAR-TO-DATE ORDER TREND
EXPERIENCE WILL CONTINUE. MOREOVER, THE COMPANY'S ORDER FORECASTING MODEL IS
DEPENDENT ON ASSUMPTIONS CONCERNING RETAIL INVENTORY LEVELS, CONSUMER DEMAND,
AND DEALER EXPECTATIONS WHICH ARE BASED ON STATISTICAL RESEARCH CONDUCTED FOR
THE COMPANY THAT IS ASSUMED CORRECT AND REPRESENTATIVE OF MARKET CONDITIONS AS A
WHOLE. THE COMPANY'S EXPECTATIONS REGARDING EARNINGS AND EARNINGS PER SHARE ARE
BASED ON THE COMPANY'S SALES EXPECTATIONS AND ASSUMES IT WILL MAINTAIN ITS
HISTORICAL OPERATING MARGIN. THE COMPANY'S OPERATING MARGIN MAY BE IMPACTED BY,
AMONGST OTHER FACTORS, SHIFTS IN PRODUCT MIX, EXCHANGE RATE FLUCTUATIONS WITH
COUNTRIES THE COMPANY IMPORTS FROM, CHANGES IN FREIGHT RATES AND CHANGES IN THE
COMPANY'S HISTORICAL SELLING, GENERAL AND ADMINISTRATIVE EXPENSE RATE.
IF NOT MENTIONED ABOVE, OTHER FACTORS, INCLUDING CONSUMER ACCEPTANCE OF NEW
PRODUCTS; PRODUCT DEVELOPMENT EFFORTS; IDENTIFICATION AND RETENTION OF SCULPTING
AND OTHER TALENT; COMPLETION OF THIRD PARTY PRODUCT MANUFACTURING AND SHIPMENT;
DEALER REORDERS AND ORDER CANCELLATIONS; CONTROL OF OPERATING EXPENSES;
CORPORATE CASH FLOW APPLICATION, INCLUDING SHARE REPURCHASES; FUNCTIONALITY OF
INFORMATION, OPERATING AND DISTRIBUTION SYSTEMS; IDENTIFICATION, COMPLETION AND
RESULTS OF ACQUISITIONS, INVESTMENTS, AND OTHER STRATEGIC BUSINESS INITIATIVES;
GRANTS OF STOCK OPTIONS OR OTHER EQUITY EQUIVALENTS; ACTUAL OR DEEMED EXERCISES
OF STOCK OPTIONS; AND INDUSTRY, GENERAL ECONOMIC, REGULATORY, TRANSPORTATION,
AND INTERNATIONAL TRADE AND MONETARY CONDITIONS, CAN SIGNIFICANTLY IMPACT THE
COMPANY'S SALES, EARNINGS AND EARNINGS PER SHARE. 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 #
<PAGE>
DEPARTMENT 56, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
UNAUDITED
<TABLE>
<CAPTION>
ASSETS
July 3, January 2,
1999 1999
------------- ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 3,515 $ 2,783
Accounts receivable, net 100,877 26,170
Inventories 26,035 18,287
Other current assets 13,565 10,661
------------- -----------
Total current assets 143,992 57,901
PROPERTY AND EQUIPMENT, net 22,204 17,722
GOODWILL, TRADEMARKS AND OTHER, net 155,528 157,531
OTHER ASSETS 1,680 129
-------------- --------------
$ 323,404 $ 233,283
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Revolving line of credit $ 79,000 $ -
Accounts payable 10,950 11,100
Other current liabilities 26,226 17,525
------------ -----------
Total current liabilities 116,176 28,625
DEFERRED TAXES 5,923 5,923
LONG-TERM DEBT 20,000 20,000
STOCKHOLDERS' EQUITY 181,305 178,735
------------ -----------
$ 323,404 $ 233,283
=========== ==========
</TABLE>
<PAGE>
DEPARTMENT 56, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
UNAUDITED
<TABLE>
<CAPTION>
Quarter Ended 26 Weeks 26 Weeks
----------------------------- Ended Ended
July 3, July 4, July 3, July 4,
1999 1998 1999 1998
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
NET SALES $ 82,721 $ 69,920 $ 116,369 $ 118,947
COST OF SALES 33,478 28,710 47,230 49,304
----------- ----------- ----------- ------------
Gross profit 49,243 41,210 69,139 69,643
Selling, general, and administrative expenses 16,463 13,605 28,951 25,234
Amortization of goodwill, trademarks and other 1,270 1,258 2,533 2,410
------------ ------------ -------------- ------------
OPERATING INCOME 31,510 26,347 37,655 41,999
Interest expense 1,397 970 1,913 1,741
Other, net (109) (26) 126 (418)
----------- ---------- ----------- ---------
INCOME BEFORE INCOME TAXES 30,222 25,403 35,616 40,676
INCOME TAXES 11,484 10,034 13,534 16,067
----------- ---------- ----------- -----------
NET INCOME $ 18,738 $ 15,369 $ 22,082 $ 24,609
========== ========== ========== ==========
NET INCOME PER SHARE $ 1.06 $ .81 $ 1.24 $ 1.28
======== ======= ======= ======
NET INCOME PER SHARE ASSUMING DILUTION $ 1.04 $ .80 $ 1.22 $ 1.26
======== ======= ======= ======
OPERATING CASH FLOW (1) $ 33,745 $ 28,188 $ 41,745 $ 45,914
========= ========= ========= ==========
WEIGHTED AVERAGE SHARES
OUTSTANDING - BASIC 17,710 18,962 17,874 19,186
======== ======== ======== =========
WEIGHTED AVERAGE SHARES
OUTSTANDING - ASSUMING DILUTION 17,949 19,298 18,118 19,497
======== ======== ======== =========
</TABLE>
(1) Earnings before interest, income taxes, depreciation and amortization
expenses.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-01-2000
<PERIOD-END> JUL-03-1999
<CASH> 3,515
<SECURITIES> 0
<RECEIVABLES> 100,877
<ALLOWANCES> 0
<INVENTORY> 26,035
<CURRENT-ASSETS> 143,992
<PP&E> 22,204
<DEPRECIATION> 0
<TOTAL-ASSETS> 323,404
<CURRENT-LIABILITIES> 116,176
<BONDS> 20,000
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 323,404
<SALES> 116,369
<TOTAL-REVENUES> 116,369
<CGS> 47,230
<TOTAL-COSTS> 47,230
<OTHER-EXPENSES> 31,484
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,913
<INCOME-PRETAX> 35,616
<INCOME-TAX> 13,534
<INCOME-CONTINUING> 22,082
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,082
<EPS-BASIC> 1.24
<EPS-DILUTED> 1.22
</TABLE>
