DEPARTMENT 56 INC - 10-Q Quarterly Report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: October 4, 2003

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 incorporation or organization)	(I.R.S. Employer Identification No.)

One Village Place, 6436 City West Parkway, Eden Prairie, MN 55344

(Address of principal executive offices)

(Zip Code)

(952) 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 ý No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).

Yes ý No o

As of October 4, 2003, 13,161,161 shares of the registrant’s common stock, par value $.01 per share, were outstanding.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

DEPARTMENT 56, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In thousands)

	OCTOBER 4, 2003		DECEMBER 28, 2002		SEPTEMBER 28, 2002

ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	1,322	$	42,494	$	3,535
Accounts receivable, net	91,205		32,620		95,521
Inventories	26,367		14,324		21,550
Other current assets	8,159		9,093		10,213
Total current assets	127,053		98,531		130,819

PROPERTY AND EQUIPMENT, net	18,893		20,908		21,519
GOODWILL, TRADEMARKS AND OTHER, net	59,883		60,061		60,118
OTHER ASSETS	2,589		1,825		2,165
	$	208,418	$	181,325	$	214,621

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:
Current portion of long-term debt	$	22,000	$	2,235	$	2,235
Borrowings on revolving credit agreement	41,000		—		36,000
Accounts payable	7,823		8,172		10,527
Other current liabilities	12,733		15,239		18,447
Total current liabilities	83,556		25,646		67,209

OTHER LIABILITIES	2,433		1,358		1,602
DEFERRED TAXES	5,115		5,808		5,409
LONG-TERM DEBT	—		51,765		51,765
STOCKHOLDERS’ EQUITY	117,314		96,748		88,636
	$	208,418	$	181,325	$	214,621

See notes to condensed consolidated financial statements.

DEPARTMENT 56, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(In thousands, except per share amounts)

	QUARTER ENDED
	OCTOBER 4, 2003		SEPTEMBER 28, 2002
NET SALES	$	54,642	$	58,562
COST OF SALES	26,204		27,869
Gross profit	28,438		30,693

OPERATING EXPENSES:
Selling, general, and administrative	15,019		15,577

INCOME FROM OPERATIONS	13,419		15,116

OTHER EXPENSE:
Interest expense	451		761
Other, net	37		233

INCOME BEFORE INCOME TAXES	12,931		14,122

INCOME TAX PROVISION	4,655		5,084

NET INCOME	$	8,276	$	9,038

NET INCOME PER SHARE – BASIC	$	0.63	$	0.69

NET INCOME PER SHARE – ASSUMING DILUTION	$	0.62	$	0.69

WEIGHTED AVERAGE SHARES OUTSTANDING – BASIC	13,138		13,044
WEIGHTED AVERAGE SHARES OUTSTANDING – ASSUMING DILUTION	13,294		13,181

See notes to condensed consolidated financial statements.

	40 WEEKS ENDED OCTOBER 4, 2003		39 WEEKS ENDED SEPTEMBER 28, 2002
NET SALES	$	143,176	$	150,911
COST OF SALES	65,952		68,126
Gross profit	77,224		82,785

OPERATING EXPENSES:
Selling, general, and administrative	45,886		48,365

INCOME FROM OPERATIONS